Q: Is it legal for a credit-card company to charge interest for the time between the statement date and the due date? Why isn’t the amount due really the amount to pay it off?— David Keller, Golden
A: Yes, it’s perfectly legal. Unless you pay your credit-card balance in full each month, the issuer charges interest at the rate you agreed to when you obtained the card.
That information should be in your cardholder agreement. Interest is charged in one of four ways: average daily balance, adjusted balance, previous balance and two-cycle balance. Most cards use the average-daily-balance method, in which each day’s balance is added together with purchases, payments are subtracted, and then the whole bit is divided by the number of days in that billing period. That number is then multiplied by the monthly finance rate (which is 1.5 percent on an 18 percent card), according to .
Most cards allow a “float” or “grace” on new charges of about 20 to 25 days. You receive the bill and have a due date. Send in the entire amount by the due date, and you avoid finance charges.
Miss the date or don’t pay the whole amount, and interest begins accruing. Even if you pay the “amount due” on a subsequent statement, interest continues to add up on a prior balance from the date of your statement to the due date. That means the payoff amount is actually more than your statement balance shows.
If you wish to know the payoff amount if your payment is received by the due date, contact the card issuer. It should be able to give you that exact figure.
David Migoya wants to get the answers to your consumer questions. E-mail consumertips@denverpost.com or write to Consumer Shopping Bag, The Denver Post, 101 W. Colfax Ave. Suite 600, Denver, CO 80202.
