Credit Card Agreement Changes – TWO On-Time Statement Periods Required Before Interest Free!

Okay, so we are guilty of not reading the new agreement that came out in the early spring from our credit card (CC) suppliers.

We have been so busy lately that a CC payment was missed by a couple of days.

So, when checking the transactions and balance on the card the interest debit was there and it was nowhere near the expected amount.

Apparently, if we took time to read the new agreement, the CC companies (that is VISA, MasterCard, and others) mandated that if an on-time payment was missed interest was calculated on all transactions, all transactions, from the beginning of the grace period to the date the interest debit was posted.

Now, if we make our next payment on-time, we will still have an interest payment appear on our next statement despite the fact that we paid off the balance. That interest will span the previous statement period and the current statement period as we understand the explanation.

Essentially, under the new terms our interest payment was what we were expecting plus 63% of the dollar amount due on the missed statement!

Lesson #1 learned: Read and try and understand the Terms & Conditions!

Lesson #2 learned: Pay off those credit cards on-time.

For high transaction volume cards like this one, that 63% represents a pretty steep step up for the CC company’s profit margins.

Looks like this is the methodology being used to recoup some of the new 1%, 2%, or higher “payback” type credit cards hitting the market as merchants have been very resistant to giving the CC companies and further slices of their pie.

In the end, there is no such thing as a free lunch. Someone has to pay for it and it always ends up being the end user/consumer.

• Royal Bank VISA Agreement (T&Cs)

Quote:

Interest

When you or your Authorized Users use your Visa Card or your Visa Account number to make a purchase, we are loaning you the amount of the purchase. You can avoid interest on both purchases and fees by always paying the New Balance in full on or before the Payment Due Date every month. Your New Balance is shown on your Visa Statement and is made up of all purchases, cash advances, interest and fees incurred up to the Visa Statement period end date.

If you do not pay your New Balance in full on or before the Payment Due Date shown on your Visa Statement, you will lose your interest-free status for purchases and fees. In such event, you must then pay interest on all purchases and fees shown on that month's Visa Statement as well as interest on all new purchases and new fees. Interest is calculated from the transaction date (for fees this is the date the fee is posted to the Visa Account) until the day we process your payment for the total amount you owe.

To regain interest-free status on your purchases and fees, you must pay your New Balance by the Payment Due Date. Interest on previously billed purchases and fees which has accrued since the end of the last Visa Statement period to the date payment in full of the New Balance is received, will appear on your next month's Visa Statement.

Philip Elder
MPECS Inc.
Microsoft Small Business Specialists
Co-Author: SBS 2008 Blueprint Book

*All Mac on SBS posts will not be written on a Mac until we replace our now missing iMac! (previous blog post)

Windows Live Writer