March 11, 2010
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Paying over to reduce that high-interest portion, Pt.2
Gotta watch those people.One of the new and more-revolutionary requirements of the new regs is the provision that any payment amounts above the minimum monthly credit card payments must be applied to the highest-rate accounts first. The way it always has been is the opposite. That is, all payments made would only be applied toward the lowest interest credit card accounts until they were paid in full. If a person owed $2,000 on a 2.5% account and another $600 on a 25% account, they could never pay anything against that 25% account until the 2.5% account was completely paid off. Meanwhile, about $15 more dollars would be added to that $600 principle every month. After about 6 months, that $600 principle has climbed to a $700 principle and the new finance charge will keep climbing by $20, then $25, then $35 then $50, then $75 and, eventually, that little $600 credit card Cash Advance is going to cost several thousand dollars!
Now, that should have changed by this month. Leave it to the shysters, however, to find ways to skirt the purpose (their purpose will always be to squeeze more money out of us (for example, just in credit card penalties imposed on us the credit card banks jumped their profits from $11.7 billion in 2003 to a double $22.9 billion for last year alone. More on that later).
As I mentioned in the last article, I was advising a friend to wait until after the new regs went into effect before paying above the minimum on her credit card in February. So, when the March statement arrived yesterday, I immediately examined it to see what Chase had done with the extra $50 my friend had paid over the minimum. Wouldn't you know that they wouldn’t apply any of it toward the high-interest account. They simply applied it toward the lowest-interest account and tacked another $12 worth of finance charge onto the principle of the high-interest in order to raise the finance charge next month even higher. I need to call Chase to get the low-down.