Skip to main content
No. of Recommendations: 0
I just made a sizable payment to Discover ($8,700) which they posted on the due date. (Aug. 15) On the 16th, the automated telephone info showed a balance of about $1,100. On the 17th, which was the beginning of the next billing cycle, the automated telephone info showed a balance of about $1,300. Obviously, this meant that I was being charged interest on the balance that I had applied the $8,700 to. When I called them (twice) about this, both of the people I talked to were adament in their assertions that it is appropriate to charge interest from the previous month like this. Since I had been told that my new balance was $1,100, I was surprised that the interst was not based on that figure. Was I wrong to assume this? If not, to whom can I appeal this? I would really appreciate your Foolish advice on this.
Print the post Back To Top
No. of Recommendations: 3
Yes, Discover can do this. If you read there literature carefully, it states that they do this. I called one time on my account and a new customer service person there was surprised to find that they did that, too. It was an eyeopener for me, too.
We try not to carry a balance with Discover and pay it off monthly. If we think we'll need to carry a balance, we do a balance transfer quickly.

It's a hard lesson. This must be how they make money so we can get cash back. :-0.
Print the post Back To Top
No. of Recommendations: 0
When I paid off my card in full a few months ago I had the same issue. Same thing with AMEX Blue. FUSA however they do the two cycle billing in the second month you have the account. Kind of crappy but its in the card member agreement.
Print the post Back To Top
No. of Recommendations: 1
Thanks for the input. Even though I didn't get the answers I hoped for, I had a suspicion that this might be the case. I'll chalk it up to an expensive but valuable lesson. Just one more incentive to get out of the clutches of these bloodsuckers and stay out!
Print the post Back To Top
No. of Recommendations: 1
<<I just made a sizable payment to Discover ($8,700) which they posted on the due date. (Aug. 15) On the 16th, the automated telephone info showed a balance of about $1,100. On the 17th, which was the beginning of the next billing cycle, the automated telephone info showed a balance of about $1,300. Obviously, this meant that I was being charged interest on the balance that I had applied the $8,700 to. When I called them (twice) about this, both of the people I talked to were adament in their assertions that it is appropriate to charge interest from the previous month like this. Since I had been told that my new balance was $1,100, I was surprised that the interst was not based on that figure. Was I wrong to assume this? If not, to whom can I appeal this? I would really appreciate your Foolish advice on this. >>


In my view, your creditor owes you an explanation of why and how this charge was computed. After all, if they were to sue you over this issue, they would have to convince a judge they acted properly.

So I'd call them back and try again ---ask for a supervisor if need be.


Your ultimate protection would be to payy off all except the disputed amount, and send them a letter explaining why you feel the account is paid in full. If they refer this to a collection agency, use the same letter to dispute the charge. If they report your account delinquent to a credit reporting agency, use your letter to dispute that report.


But I'd be surprised if you can't find someone to think critically about this and correct eny error.




Seattle Pioneer

Print the post Back To Top
No. of Recommendations: 3
This is know as two-cycle billing and is widly used by the credit card industry.

What they do is average your balance over the last two months and charge you interest on that amount.

This means you pay more interest in the month after you get rid of a balance. It also means you pay less interest the first month you have put the balance on the card because they are averaging in the no-balance month before that. I think a lot of them start the two-cycle balance the second month you have the card, so they can still charge you on the full balance if you run it up right after you get it.

xtn
Print the post Back To Top
No. of Recommendations: 0
Bry

Sounds like what happened to me and yes some cards do it. I went to FL on a business trip earlier this year and put everything on the card. Bill was over $3k. Well I got the money due from the company and had mine but a relative owed me a hundred or so for things I had picked up for them and didn't get it to me on time so I paid off everything but that little bit figuring I'ld get the rest later. Well when the bill came in the next month I saw the finance charge and went ballistic. No way that heavy a charge for that little balance. Called and spoke to the rep and was told that if the balance isn't paid in full they hit you with interest on the whole debt for the previous month not just what you didn't pay. The average daily balance thing. Since I had never carried a balance on the card it didn't occur to me that I would get hit this way. Expensive lesson. Now make sure I pay the balance on that bad boy if I ever have to use it, which I don't that often, as it's my travel card.

Wolfshead
Print the post Back To Top
No. of Recommendations: 0
I recently paid off a card and had this happen. After sending in the amount they said was the payoff figure I got a statement for about $30 in finance charges. When I called to see what was going on I got the two cycle billing deal. I told them that I called for a payoff figure and was given one and had sent that amount and that extra $30 was nowhere mentioned so I didn't feel I should have to pay it if they can't give me correct information. Surprisingly they took it off and the account is now $0 and closed.

Wolfshead
Print the post Back To Top
No. of Recommendations: 1
I just made a sizable payment to Discover ($8,700) which they posted on the due date. (Aug. 15) On the 16th, the automated telephone info showed a balance of about $1,100. On the 17th, which was the beginning of the next billing cycle, the automated telephone info showed a balance of about $1,300. Obviously, this meant that I was being charged interest on the balance that I had applied the $8,700 to. When I called them (twice) about this, both of the people I talked to were adament in their assertions that it is appropriate to charge interest from the previous month like this. Since I had been told that my new balance was $1,100, I was surprised that the interst was not based on that figure. Was I wrong to assume this? If not, to whom can I appeal this? I would really appreciate your Foolish advice on this.

HI Bry,

I'm afraid that they are indeed correct in their calculations. While you sent a large payment, it didn't pay off the full amount, so the interest is based on the previous balance.

I unFoolishly, long ago did something similar. For some very stupid reason, instead of sending off the entire amount, I paid off all but just a small amount. To my chagrin, my next bill contained a hefty amount of interest, and when I called, it was explained to me just as it was to you.

From that point on, I made sure to always pay the balance in full so as not to pay any interest at all.

Tony
...but I still am...

Off2Aruba
Print the post Back To Top
No. of Recommendations: 0
The interest charge makes sense to me. You didn't pay off the balance within the grace period, so they charged you one month's interest on the average daily balance. I don't know of a single credit card, my nice credit union included, that does not compute based on the average daily balance (as opposed to the closing balance, which is what you were expecting). Since the bill was not paid until the last day of the billing period, the average daily balance is more-or-less equal to the balance for the whole month. (You did have the use of their money for pretty much the whole cycle, so they are charging you intersest on it.) Look on the bright side, they could to a FUSA-style double-cycle billing, which computes the average daily balance over two months instead of one.

SirWired
Print the post Back To Top
No. of Recommendations: 0
So according to your numbers you have an interest rate around 24%.
Print the post Back To Top
No. of Recommendations: 0
Right, and that is why I paid this one off. I paid off the balance 4 days before the due date and I may be wrong but don't they add the finance charges on the balance that isn't paid? The other cards I have paid off I never had this problem with.
Print the post Back To Top
No. of Recommendations: 0
Discover does 2-cycle billing, which means, that they charge interest on the current month and the previous month. Check your terms and conditions statement.

Ishtar
Print the post Back To Top
No. of Recommendations: 1
The thing is with Discover you only have a grace period if you pay in full every month. Once you start revolving no more grace.
Print the post Back To Top
No. of Recommendations: 0
Did your billing period end on the 16th? Remember that they use "Average Daily Balance" for calculating interest. If for all but one day of the billing period your balance was $9800 then the average balance would pretty much be that.

- David
Print the post Back To Top
No. of Recommendations: 0
I just made a sizable payment to Discover ($8,700) which they posted on the due date. (Aug. 15) On the 16th, the automated telephone info showed a balance of about $1,100. On the 17th, which was the beginning of the next billing cycle, the automated telephone info showed a balance of about $1,300. Obviously, this meant that I was being charged interest on the balance that I had applied the $8,700 to. When I called them (twice) about this, both of the people I talked to were adament in their assertions that it is appropriate to charge interest from the previous month like this. Since I had been told that my new balance was $1,100, I was surprised that the interst was not based on that figure. Was I wrong to assume this? If not, to whom can I appeal this? I would really appreciate your Foolish advice on this.

Don't freak out too much. Discover calculates interest using the two-cycle average daily balance method. This means that when they calculate interest on the statement closing 8/31, they use the avg daily balance since 7/1. The end result is that when you first start carrying a balance, you pay LESS interest, and while you are paying it down, you pay a little MORE interest. It's all a wash in the end.

There have been examples with all the math & stuff posted before, but I don't have a link handy.

d
Print the post Back To Top