I may have missed the boat, what's up with credit card interest policies?
January 26, 2012 2:35 PM Subscribe
Are there any credit cards out there that still charge interest on the outstanding balance rather than the total balance?
posted by anonymous to Work & Money (5 answers total)
I have 2 credit cards, one personal, the other for my business that I own. Both with the exact same interest rate. I happened to charge the same amounts on the two cards at the same time and saw the resulting interest. I later paid an amount that was above the minimum, but lower than the outstanding balance (the payment was the same amount to both cards) and the interest charges came out totally different!
After a bit of research, I found out that my personal card charges interest on the outstanding balance, where the business card charges interest on the total balance at the time the interest is assessed. Then there's also a statement on the business card that roughly says as long as there's a charge on the card, regardless of if I paid the previous month's outstanding balance in full, they will keep charging interest until the account reaches zero. My previous understanding was that as long as the outstanding balance was paid, no further interest would be assessed.
So I got into a catch 22 with the bank. Here's a rough timeline to illustrate:
Month 1 - Purchases.
Month 2 - Pay partial. Purchase more.
Month 3 - Notice high interest on biz card. Pay full outstanding balance. Purchase more.
Month 4 - More high interest on one card & flag problem in head. Pay outstanding balances again. Keep purchasing for business stuff.
Month 5,6... - Cycle continues, more high interest on biz card, WTF? APR not adding up. Later find policy change in original contract and immediately change payment procedures to pay balance to zero.
I should note that the personal account is through a credit union and the business account is through a bank. Does this make a difference?
Looking for a new business credit card, I asked a different bank about this. According to this bank's representative this change swept through the credit card industry a few years ago and I was probably grandfathered in on the personal card and being the good business customer I never noticed until I got into that situation expecting something different. Read the contract dummy... ;)
So, are there any cards out there that calculate interest with the "outstanding balance" methodology or have they all changed to the "total balance" method now because it makes them more money?
I've heard Chase and AmEx business cards are good via a couple online reviews, but I've never had a card with a yearly membership fee and I don't really care about rewards because it seems that the industry is raising rates on vendors that accept the cards in order to pay for the rewards, which from my perspective is vendors just pass that through back onto me anyway by raising prices. I'm paying my own rewards! That's no reward! And I'm sure credit card companies take from those too, gradually eating away at our economy and our pocket books.
For now my personal card remains grandfathered into the old system but who knows how long that will last.
What's the community opinion on Chase and AmEx? I read a few reviews that say these are good cards to have for business, but they seem the same as the rest to me, the reviews only touched on great customer service, but if the underlying policies are the same, they're no different from the rest financially speaking.
I only bring this up because as my business grows (we just turned 3 years last week so we're still small potatoes and this situation was also small and easily dealt with), but I think these types of changes in interest policy would have much larger dollar amount impact on a large corporation which we might like to be someday. How do you deal with this or do larger corporations get extra perks from sheer volume of usage?
Am I dreaming of an interest policy long past that will never return? How does your business handle credit - use more often or sparingly? Did you notice the change in interest calculation policies and were you grandfathered in or not? How do you feel about rewards from a business standpoint?