Hi All. I'm sharing here what I posted today on the HSN thread which is where I first learned about this.
I took the opportunity to call Comenity Bank and spoke with a very helpful representative. I had a current balance of $125 on my Meijer card and I asked him what happens when I pay that $125 amount in full when I get my August statement (which I normally receive by the 17th of each month). He kindly informed me that I would be billed interest on my September statement for carrying the balance past the closing date. It’s referred to as “Trailing Interest” or “Residual Interest.” He also added that many companies are doing this, but the attention seems to be magnified because Comenity is one of the biggest to jump in.
Honestly, I could not get the big picture, so after I finished talking with the rep, I moved my remaining HSN flex pays to a different card, paid off my Comenity Meijer card and will no longer deal with them. This year was the time I decided to use my HSN store card for convenient flex pays on quite a few items, and now the bottom has fallen out of that convenience. Later, I started searching the web for more info and found some interesting articles that helped me better understand what the rep was saying.
Here’s an excerpt from an article that I found online that pretty much says what the customer rep I spoke to said:
“- Say you’ve been paying down a balance for several months and your credit card statement, dated the first of the month, says that your balance is now just $1,000.
– When you read that statement, you’re excited because you know that you have $1,000 in savings that you can use to pay down that balance.
– You send in your $1,000 check to the issuer on the fifth of the month, rejoicing in having finally paid off your credit card and hiding the card in a desk drawer.
– The issuer applies the payment to your account on the 10th of the month.
– Next month, you receive another statement saying that you currently hold a balance of $7.23.
– That $7.23 is residual interest. In this example, it is the amount of interest that was charged to your account between the first of the month and the 10th.
Even if you pay your credit card bills online you can be caught off guard by residual interest, Sherry says. Cardholders who access their account online to make sure their full payment has been received by the due date would see a zero balance, because the trailing interest isn’t added until the close of the subsequent billing cycle.”
So my understanding is that if my closing date is August 16 (which mine was) and I did not pay the current balance in full on that closing date, then on August 17 I just carried that balance over one day which starts the interest cycle and interest will continue to be added on with each day that passes. I monitored my HSN card everyday since that phone call and once that statement posted closed on the 16th, I paid it off. This whole thing is unbelievable and with all the different explanations for what it’s all about, I will continue to monitor these 2 cards until it’s all over (I hope) with my September statement.
Today, I received the email notifications that my statements were ready for HSN and Meijer and there are no interest charges on them. This is already 2 days after the closing date.
If you are interested in reading the full article that I took the excerpt from, search for “The ABCs of credit card residual interest.” This article is at creditcard (dot) com and was last updated June 17, 2016. Also, at the end of this article is a “See Related” paragraph with a link to 2 additional articles that might be of interest, though they are a bit older in date. (1) Common tricks and traps in the credit card fine print, and (2) Why interest charges remain after a card is ‘paid off’. Another article on a different site is: “Why Your Credit Card Isn’t Really Paid Off: How Residual Interest Works.” This article is dated April 27, 2016.
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