Need Help Understanding Credit Card Interest Rates
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Post subject: illegal interest on credit cards
LSP
Date: 1/31/2001 8:00 pm CDT
I have an intersting problem. I have a credit card on which the interest is computed on the average daily balance. My accountant tells me that I'm being robbed, as the average daily balance is always anywhere from $100.00 to $400.00 higher than the amount actually owed on the account. Anybody out there ever had this problem, or know of any law that deals with it. I'm familiar with the FDCPA, so I know it's an unfair practice, but isn't it criminal also?
Thanks,
LSP
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Susan
Date: 1/31/2001 10:38 pm CDT
What card is it if you don't mind me asking?
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Brandon
Date: 2/2/2001 9:33 am CDT
I think there are too many variables for anybody to really answer you question effectively. For one it does matter when you make your payment and how much they are. For example if you have a balance of 400.00 and you make a 200.00 dollar payment and it arrives the day it is due your average daily balance isn't going to be 200.00, it is going to be really close to the 400.00 mark and that is because if for the thirty day billing cycle they average your balance out each night your 200.00 won't make much a difference if you wait until the end of the cycle to make the payment. The credit card company I work for deals in average daily balance and I get calls everyday where people do not know how average daily balance works...some claim to be big time business people. So did the attorney mention class action?
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Board Monitor- NK
Date: 2/2/2001 11:23 am CDT
Brandon makes an excellent point about the average daily balance. If, after considering Brandon's point, you still think you are being overcharged, here's what I would do:
I would start by calling the credit card company and asking exactly how your finance charges are calculated. They should be able to explain this to your satisfaction. If you still feel that your finance charges are not being calculated correctly, you may want to send your complaint in writing to the credit card company (be sure to use their correspondence address which is not the same as the billing address) advising them that you will file a complaint with the OCC (Office of the Comptroller of the Currency) because you believe you are being overcharged and that the APR on your account has been misrepresented.
You should get some satisfaction, banks live in fear of the OCC. If not, go ahead and file a complaint with the OCC. You can find them online at
http://www.occ.treas.gov/customer.htm
Hope this helps,
Kat
creditexpert.tripod.com/home.htm
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: lsp
Date: 2/2/2001 10:46 pm CDT
Brandon:
I would agree with your assessment of average daily balances being very difficult to figure out. I worked the other end of the business with a state bank auditor for several years where we audited finance company loans. Of course they didn't use average daily balances.
An average daily balance is computed on the number of days in the billing cycle taking into account the date of any charges, and the day of any payments. It really isn't hard to figure. You simply take your previous month's average daily balance, add the interest up to the point your payment was made on a daily balance, subtract the payment on the day made and compute your interest for the remainder of the month. Add the total of these figures and divide by the number of days in the billing cycle.
I didn't understand your comment concerning the attorney and a class action -- I don't think I mentioned an attorney. I took these statements to my accountant when I thought they looked funny, and he verified my feelings. To make a point, from one month to the next -- no charges where made and a payment of $150.00 was made on the account (on time I might add and 80.00 more than the minimum payment) and yet my average daily balance for the next month was $60.00 higher than the month before. In other words I was being charged interest on $60.00 more in January than I was in December, even though I had made $150.00 payment and no charges, no late fees, etcetera. In the accounting world, this is an impossibility.
I may actually see an attorney now, but first I'll wait and see what company says, and then the OCC as Susan, I think, suggested. If it is a common business practice it definitely needs to be stopped.
LSP
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Linda in VA
Date: 2/2/2001 11:22 pm CDT
Wow! here is Capital One's explanation of average daily balance (lifted from their website):
Average Daily Balance (including new purchases).
To calculate finance charge, we multiply the daily balance of each segment of your account (e.g. cash advance segment, purchase segment, special purchase segment, special transfer segment) by your daily periodic rate(s). We total the results of these daily calculations to arrive at your total periodic finance charge. To obtain the daily balances for the current billing cycle, we take the beginning balance of each segment each day, add any new transactions and the daily finance charge calculated on the previous day’s balance to each segment, and subtract any payments or credits posted as of that day. This gives us the separate daily balance for each segment. To calculate your total finance charge, multiply the Balance Rate Applied To, which equals your average daily balance, by the daily periodic rate and by the number of days in the billing period. Due to rounding on a daily basis, there may be a slight variance between this calculation and the amount of finance charge actually assessed.
If the code Z or N appears on your printed statement next to Balance Rate Applied To, we multiply the average daily balance of each segment by your monthly periodic rate. To obtain the average daily balance for the billing period covered by this statement, we take the beginning balance of each segment each day, add any new transactions to each segment, and subtract any payments or credits. (If the code N appears on your printed statement next to Balance Rate Applied To, we also subtract any unpaid finance charge included in the balance of each segment.) This gives us the daily balance of each segment. Then, we add up all the daily balances for each segment for the billing period and divide by the total number of days in the billing period. This gives us the average daily balance of each segment. Please be aware that this information may not appear on your online bill or statement.
hmmmmmmmmmmmmm......
Linda (scratching her head in VA)
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jose rivera
Date: 2/2/2001 2:28 pm CDT
THE CARD I AM INQURING ABOUT IS CALLED NET1st NATIONAL BANK MASTER CARD ANY IFORMATION WILL BE APPRECIATED.
Susan wrote:
-------------------------------
What card is it if you don't mind me asking?NET1st MASTERCARD
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Brandon
Date: 2/6/2001 2:18 pm CDT
Ok so sometimes I get a little ahead of myself by mentioning lawsuit. I wouldn't actually suggest doing it because probably everything you need to know is right there. As you seen with the Capital One post the legal description that are supposed to state for you is hard to understand for somebody who knows very little about how avg. daily balance is computed or that type of financing. My best guess is if the card is a MasterCard, that MasterCard has had their legal team check all of Net1st's policy manual and literature and that it is all legal to the t.
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