Some people have mixed understanding of the rules when it comes to balance transfers, as apparently in the Dodd-Frank regulations they were attempting to deal with a rather sneaky Credit Card rule, but as of today, 2/12/2014 those dastardly credit card companies are still trying to trap balance transfer people with a very sneaky rule.
If you transfer a balance onto a card, in order to capture the interest free period, the card is loaded with a balance that has no interest. This can come at a transfer fee of 2-4% but the period of interest free, ranging from 12-21 months typically makes this a good deal. However, this card is now ‘untouchable’ because any charges that you put on the card will incur interest at the regular rate, and the interest free balance will act as a firewall, meaning that you have to pay this down first, then you can start attacking the new purchase balance.
In the meantime, what that means is the money you transferred in which was supposed to help your finances, is actually preventing you from paying off a charge that is incurring interest at the regular rate. I have heard many things to say that this shouldn’t be happening, but my friendly offer from Chase this morning said exactly that.
So, whilst it may not be proper, or may not be right, or whatnot, it is clearly still the view of Chase in this case that they will be charging you interest on any new purchases when you have made a balance transfer, and you need to pay it off in full every month in order to avoid that. Therefore, if, for whatever reason you decide to complete a balance transfer, lock that card up and do not touch it, because drawing it out of your wallet and making a single purchase by mistake will start interest ticking on that purchase that you cannot stop accruing without first paying down the balance in full.
I thought part of DFA was that CC companies had to apply payments to the portion of the balance with the highest interest rate.
That is what I heard to, but that letter I received implies otherwise no?
Me too, but this is Chase. I guess at this point they could pretty much start killing people and just get away with paying some token fine to the SEC. I will have to have a deeper look into this but certainly I have used other BT’s where you can make purchases and the payments always apply to the higher interest first
Ok I get what they are saying now. First let me back up and say I was wrong it’s not Frank-Dodd but the separate Federal Credit Card Reform Act of 2009. What that act says is that payments on a credit card above the minimum payment must be applied to the balances with the highest interest first. So if you have a $1,000 balance at 0%, a $100 purchase balance at 10% (so total $1,100 balance) and a min payment of $25, and then you pay $40 on the card then they *have* to apply $15 to the $100 balance and can then apply the $25 to the 0% balance.
However what Chase is saying in your example above is that if you are carrying a balance then any new purchases *immediately* start accruing interest. While the wording does not imply it, I would think that if you pay the full amount of your purchases, plus interest, plus the minimum payment, you’d be in the clear.
Of course that is pretty complex for the average spod to work out, and that is what Chase is relying on. Which is why I don’t give a s*** about f***ing them at every opportunity
Call me a spod, but it reads quite clearly to me that you have to pay off the entire balance (including any transferred balance ) in full, each month to avoid paying interest.
Now, of course there could be more to it, but it seems pretty straightforward case of Chase screwing you over, if said Credit Card Reform act has been implemented, and perhaps breaking the law, and I too will continue to fight them, until I get their links, and then I will delete this post and all knowledge of who you are 🙂
Good man! Yes the act was signed in 2009 and became fully effective even for existing accounts as of February 2010. To be this blatant about it, I would assume Chase’ lawyers have found some loophole in it they can rely on. But I’d very curious to see what they have to say about it…
I just transferred some balances to a Citi card (0% til 5/15). I hope I did not accidentally “lock” myself out of it.
I can confirm this happened to me twice last year on my Wells Fargo Platinum card. Wells Fargo does not seem to follow the law either and is doing the same exact thing Chase is doing.
@MilesAbound Carrying a 0% balance, then making a single purchase does trigger interest on the purchase from Day 1. There is simple no grace period anymore. It takes 2 statements to weed out the interest charges when attempting to “be in the clear” by excessively overpaying with a PIF purchase + purchase interest + min payment + extra amount of several hundred. etc.
If that weren’t enough it gets worse, much worse. If I carry more than a single 0% balance I notice that Wells Fargo applies payments across the board to each 0% balance, rather than paying down the oldest 0% balance first as I naively believed they are legally required to do. So that means paying the whole account balance to $0.00 BEFORE the first 0% balance expires.