Trailing Interest / Residual Interest

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Brad Bishop
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Trailing Interest / Residual Interest

Postby Brad Bishop » Sun Feb 19, 2017 10:48 am

This is a new one for me:

Trailing Interest or Residual Interest.

"Trailing interest is the amount of interest that accrues between when a credit card bill is sent, and when payment is received. Also called "residual interest," It applies only when you carry a balance on your credit card."

Just had this happen to my on my Amex. I've never experienced this before (30yrs dealing with credit cards). In the past it's always been:
1) charge to a card
2) if you carry a balance then interest is charged on that balance upon the next statement
3) If you pay the statement balance (regardless of whether you've paid interest or not) then you're done (as long as it gets there before the next billing cycle)

How I hit this:
1) I had a business trip and charged it to Amex. (no cash advances or anything of the sort)
2) I didn't get reimbursed on it in a timely manner partly because of the holidays and partly because I filled out a form wrong.
3) I paid off about 1/3 of the total figuring that, yeah, I'll pay $20 or so in interest, not a huge deal.
4) I get reimbursed and pay off the rest before the cycle ended
5) I get my billing statement clearly showing previous balance and payments received being equal and then interest charges of $3.

I get what they're doing: They're treating it like an auto loan or a home loan where you have to get the payoff amount for that day, otherwise you incur additional interest. I kind of understand this with both the amounts and the way the loans work for auto/home.

With credit cards, though, it seems both inconvenient and it gets my mind into, "Well, now what do I owe?"- even after I think I've paid it off. For example, the $3 sitting there and I didn't find out about it until today, 4 days after the statement was generated, and, theoretically, I owe 4 days of interest on the $3. It sort of makes it like I have to call the bank each and every time I want to pay something off but, this is a credit card. The whole point is convenience.

I'm thinking that the next time my Amex comes up for renewal then I'm just done with them. It's such a BS fee, to me, like some bean counter decided, "How can we get them for just a little more??" I think they're in their rights to do it, it just makes me not want to do business with them.

Is this something new with credit cards? I hadn't heard about it until today and then I had to look it up.

Is it common, now?


Tubpbs
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Re: Trailing Interest / Residual Interest

Postby Tubpbs » Sun Feb 19, 2017 4:07 pm

Brad Bishop wrote:This is a new one for me:

Trailing Interest or Residual Interest.

"Trailing interest is the amount of interest that accrues between when a credit card bill is sent, and when payment is received. Also called "residual interest," It applies only when you carry a balance on your credit card."

Just had this happen to my on my Amex. I've never experienced this before (30yrs dealing with credit cards). In the past it's always been:
1) charge to a card
2) if you carry a balance then interest is charged on that balance upon the next statement
3) If you pay the statement balance (regardless of whether you've paid interest or not) then you're done (as long as it gets there before the next billing cycle)

How I hit this:
1) I had a business trip and charged it to Amex. (no cash advances or anything of the sort)
2) I didn't get reimbursed on it in a timely manner partly because of the holidays and partly because I filled out a form wrong.
3) I paid off about 1/3 of the total figuring that, yeah, I'll pay $20 or so in interest, not a huge deal.
4) I get reimbursed and pay off the rest before the cycle ended
5) I get my billing statement clearly showing previous balance and payments received being equal and then interest charges of $3.

I get what they're doing: They're treating it like an auto loan or a home loan where you have to get the payoff amount for that day, otherwise you incur additional interest. I kind of understand this with both the amounts and the way the loans work for auto/home.

With credit cards, though, it seems both inconvenient and it gets my mind into, "Well, now what do I owe?"- even after I think I've paid it off. For example, the $3 sitting there and I didn't find out about it until today, 4 days after the statement was generated, and, theoretically, I owe 4 days of interest on the $3. It sort of makes it like I have to call the bank each and every time I want to pay something off but, this is a credit card. The whole point is convenience.

I'm thinking that the next time my Amex comes up for renewal then I'm just done with them. It's such a BS fee, to me, like some bean counter decided, "How can we get them for just a little more??" I think they're in their rights to do it, it just makes me not want to do business with them.

Is this something new with credit cards? I hadn't heard about it until today and then I had to look it up.

Is it common, now?


I'm familiar with it but surprised by Amex using it in this circumstance.

To be clear, did you pay the entire statement balance before the due date? Or you paid it all before your next statement closed?

I would give Amex a call and inquire about it and after you gave an adequate explanation ask them to waive the interest and see what they have to say.
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Chase - Freedom, CSP, RC, Ink Plus
Citi - DC, Prestige
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Brad Bishop
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Re: Trailing Interest / Residual Interest

Postby Brad Bishop » Sun Feb 19, 2017 5:00 pm

Tubpbs wrote:I'm familiar with it but surprised by Amex using it in this circumstance.

To be clear, did you pay the entire statement balance before the due date? Or you paid it all before your next statement closed?

I would give Amex a call and inquire about it and after you gave an adequate explanation ask them to waive the interest and see what they have to say.


Due Date was 2/15, according to the statement. I paid the amount in full on 1/24.

They waived the fee. Well, the guy said he waived the fee after he explained what trailing interest was. He did it because I was a long standing customer. The problem is: The "trailing interest" clause is still there. I do not, nor will I, call them anytime an amount crosses the 30-day period to get a "payoff amount" on a credit card. That's just dumb to me.

Oh, one thing I noticed: They charged me the $2.94 for "trailing interest" and then, on my closing statement, charged me another 1¢ for interest on the $2.94. It's beyond dumb to me. The $2.95, that was supposedly waived, still shows on my account. I'm going to give it until tomorrow and, if it's still there, call them and ask for a "payoff amount" for the $2.95 + trailing interest for a date, send them that amount on that date, and ask for a letter stating that my account is closed with $0 balance.

This isn't the way to keep customers.

Tubpbs
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Re: Trailing Interest / Residual Interest

Postby Tubpbs » Sun Feb 19, 2017 9:00 pm

Brad Bishop wrote:
Tubpbs wrote:I'm familiar with it but surprised by Amex using it in this circumstance.

To be clear, did you pay the entire statement balance before the due date? Or you paid it all before your next statement closed?

I would give Amex a call and inquire about it and after you gave an adequate explanation ask them to waive the interest and see what they have to say.


Due Date was 2/15, according to the statement. I paid the amount in full on 1/24.

They waived the fee. Well, the guy said he waived the fee after he explained what trailing interest was. He did it because I was a long standing customer. The problem is: The "trailing interest" clause is still there. I do not, nor will I, call them anytime an amount crosses the 30-day period to get a "payoff amount" on a credit card. That's just dumb to me.

Oh, one thing I noticed: They charged me the $2.94 for "trailing interest" and then, on my closing statement, charged me another 1¢ for interest on the $2.94. It's beyond dumb to me. The $2.95, that was supposedly waived, still shows on my account. I'm going to give it until tomorrow and, if it's still there, call them and ask for a "payoff amount" for the $2.95 + trailing interest for a date, send them that amount on that date, and ask for a letter stating that my account is closed with $0 balance.

This isn't the way to keep customers.


I feel like something is missing. Anyone else have any experience with what is being described?
Amex - BCP, Platinum, Business Gold
BoA - BankAmericard Cash Rewards
Chase - Freedom, CSP, RC, Ink Plus
Citi - DC, Prestige
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CarefulBuilder14
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Re: Trailing Interest / Residual Interest

Postby CarefulBuilder14 » Sun Feb 19, 2017 10:18 pm

blog/charged-interest-on-a-zero-balance/

I'm confused. Isn't this very standard on just about any card whenever a person goes from carrying a balance (not at 0%) to paying in full?

There's the common advice that to avoid interest after carrying a balance you need to pay the full statement balance for two months. Isn't this where that advice applies?
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Brad Bishop
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Re: Trailing Interest / Residual Interest

Postby Brad Bishop » Mon Feb 20, 2017 2:06 am

CarefulBuilder14 wrote:http://creditcardforum.com/blog/charged-interest-on-a-zero-balance/

I'm confused. Isn't this very standard on just about any card whenever a person goes from carrying a balance (not at 0%) to paying in full?

There's the common advice that to avoid interest after carrying a balance you need to pay the full statement balance for two months. Isn't this where that advice applies?


To clarify:

Statements:

Closing Date: 12/21/2016
Due By Date: 1/15/2017
Previous Balance: $0
Payments: $0
New Charges: $2682.53
Fees: $0
Interest Charged: $0
New Balance: $2682.53

Closing Date: 1/20/2017
Due By Date: 2/15/2017
Previous Balance: $2,682.53
Payments: $1000
New Charges: $0
Fees: $0
Interest Charged: $21.89
New Balance: $1704.42

Closing Date: 2/17/2017
Due By Date: 3/15/2017
Previous Balance: $1704.42
Payments: $1724.42
New Charges: $20
Fees: $0
Interest Charged: $2.95
New Balance: $2.95 <<< This is the one I have a problem with

I paid $1704.42 on 1/25/2017
I then had a charge of $20 (nothing related to this, just a regular charge) on 1/23/2017 which I saw and paid $20 on 2/07/2017.

They're charging me trailing interest from 1/20/2017 (Closing date for Jan) until 1/25/2017 of $2.95 on the $1704.42.

Weirdly, the $2.95 is broken down, too:
$2.94 interest on charges
$0.01 interest on promotional charges
- No idea why they're doing that, not really part of the problem.

Based on this, had I seen the bill on 1/20/2017 and set it up to be paid in full on 1/21/2017, I'd still owe a day's worth of interest. So for Amex, you need to call and get a "payoff amount" for a given date if you want to pay your balance.

I assume that you still get the first 30days free as part of the grace period, but after that, it's treated like any other daily amortized loan (like auto/home).

Also, the CSR didn't appear to credit my account like he said he would (it's 3AM so maybe it'll post later - usually these things show up right away) so I have to settle up for $3-ish with American Express later today (call, get a payoff amount, make sure the amount sent hits that day). This just adds to the frustration. I'll call later today and sort, though.

To answer your 2nd question: Whenever I've dealt with credit cards if you pay the balance then, typically, that's it. There's not a trailing/floating amount that still must be paid. I checked with Discover and asked them how they handle it. They said that if you pay the balance on your statement then your done. My other credit card I checked the terms of and saw nothing about residual interest nor do I ever remember dealing with it with them (USAA) in the past.

Unless this has become a more common thing and I've just missed it all of these years because I typically pay in full.
Last edited by Brad Bishop on Mon Feb 20, 2017 2:25 am, edited 1 time in total.

Brad Bishop
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Re: Trailing Interest / Residual Interest

Postby Brad Bishop » Mon Feb 20, 2017 2:20 am

Now that I think of it, I think I remember dealing with this, with a different credit card company (one of the "lesser" companies, don't remember which one) and thinking the same thing with regards to, "Well, how do you ever pay it off without calling??". It annoyed me then, too. This was close to 20 years ago so the memory is a bit foggy.

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Re: Trailing Interest / Residual Interest

Postby Tubpbs » Mon Feb 20, 2017 5:26 am

Brad Bishop wrote:
CarefulBuilder14 wrote:http://creditcardforum.com/blog/charged-interest-on-a-zero-balance/

I'm confused. Isn't this very standard on just about any card whenever a person goes from carrying a balance (not at 0%) to paying in full?

There's the common advice that to avoid interest after carrying a balance you need to pay the full statement balance for two months. Isn't this where that advice applies?


To clarify:

Statements:

Closing Date: 12/21/2016
Due By Date: 1/15/2017
Previous Balance: $0
Payments: $0
New Charges: $2682.53
Fees: $0
Interest Charged: $0
New Balance: $2682.53

Closing Date: 1/20/2017
Due By Date: 2/15/2017
Previous Balance: $2,682.53
Payments: $1000
New Charges: $0
Fees: $0
Interest Charged: $21.89
New Balance: $1704.42

Closing Date: 2/17/2017
Due By Date: 3/15/2017
Previous Balance: $1704.42
Payments: $1724.42
New Charges: $20
Fees: $0
Interest Charged: $2.95
New Balance: $2.95 <<< This is the one I have a problem with

I paid $1704.42 on 1/25/2017
I then had a charge of $20 (nothing related to this, just a regular charge) on 1/23/2017 which I saw and paid $20 on 2/07/2017.

They're charging me trailing interest from 1/20/2017 (Closing date for Jan) until 1/25/2017 of $2.95 on the $1704.42.

Weirdly, the $2.95 is broken down, too:
$2.94 interest on charges
$0.01 interest on promotional charges
- No idea why they're doing that, not really part of the problem.

Based on this, had I seen the bill on 1/20/2017 and set it up to be paid in full on 1/21/2017, I'd still owe a day's worth of interest. So for Amex, you need to call and get a "payoff amount" for a given date if you want to pay your balance.

I assume that you still get the first 30days free as part of the grace period, but after that, it's treated like any other daily amortized loan (like auto/home).

Also, the CSR didn't appear to credit my account like he said he would (it's 3AM so maybe it'll post later - usually these things show up right away) so I have to settle up for $3-ish with American Express later today (call, get a payoff amount, make sure the amount sent hits that day). This just adds to the frustration. I'll call later today and sort, though.

To answer your 2nd question: Whenever I've dealt with credit cards if you pay the balance then, typically, that's it. There's not a trailing/floating amount that still must be paid. I checked with Discover and asked them how they handle it. They said that if you pay the balance on your statement then your done. My other credit card I checked the terms of and saw nothing about residual interest nor do I ever remember dealing with it with them (USAA) in the past.

Unless this has become a more common thing and I've just missed it all of these years because I typically pay in full.



You say in this post that you paid the $1704 on 1/20 but that when your statement closed on 2/17 the balanace remained. If you paid on 1/20, there should be no problem. If the balance remained, then the cause of the charges is obvious.
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Chase - Freedom, CSP, RC, Ink Plus
Citi - DC, Prestige
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Brad Bishop
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Re: Trailing Interest / Residual Interest

Postby Brad Bishop » Mon Feb 20, 2017 7:22 am

Tubpbs wrote:

You say in this post that you paid the $1704 on 1/20 but that when your statement closed on 2/17 the balanace remained. If you paid on 1/20, there should be no problem. If the balance remained, then the cause of the charges is obvious.


Closing Date: 2/17/2017
Due By Date: 3/15/2017
Previous Balance: $1704.42
Payments: $1724.42
New Charges: $20
Fees: $0
Interest Charged: $2.95
New Balance: $2.95 <<< This is the one I have a problem with


That shows:
- the previous balance (from the previous statement's new balance): $1704.42, which is correct. On 1/20/2017 that was the balance.
- The total sum of payments: $1704.42 (1/25/2017) + $20 (2/07/2017)
- New charges: $20 of a charge not related to this but paid off a day or two later
.. so at this point the balance is $0 and we're well before the due date
+ Interest Charged: $2.95
- New Balance: $2.95 (just the interest)

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Vattené
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Re: Trailing Interest / Residual Interest

Postby Vattené » Mon Feb 20, 2017 3:45 pm

I thought trailing interest was a pretty common practice, but I also pay statement balances in full so don't have any personal experience. When you talked to Discover, it was clear you were talking about paying a statement balance in full that had interest accrue? It would really annoy me too, but I just thought this was standard.
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