Your friend, the credit card company! This is a reminder as to how the credit card companies extract interest rates so high it would embarrass a Mafia loan shark.
Since I am the “business guy”, close friends asked me to look at their CIBC credit card statement. My friends had reason to be extremely upset. My friends typically pay their bills on time, however the payment was mailed and ended up being two days late. CIBC charged $7.40 in interest for a two-day late payment of a huge amount of interest on an amount due on the statement of less than one hundred dollars.
My friends immediately called CIBC. CIBC kindly reminded me that if you are late paying the balance on the statement CIBC charged interest on all purchases made since the billing date of the original amount due. For clarity, that means if your payment in full is received by the them two days late, and you had added $1000 in additional purchases before you get your next statement, CIBC charges you interest on the additional $1000 for the entire period plus the original amount due. My friends asked me to review their cardholder agreement and in fact it does allow CIBC to charge interest this way, however consider how much interest they would have been dinged for if they had just put that new wide screen TV on their card.
What makes this particular instance more interesting is that they had checked their account balance on-line the day they wrote the cheque and had included payment for their new purchase up to the date they had wrote the cheque. Not only had CIBC charged them interest for the period from the date of the new purchase to the date they had received payment they also charged interest on those paid for purchases for nine additional days to the next billing date as if they had not received the money. I prepared an Excel spreadsheet and calculated the actual interest based on their current account balance. For that nine-day period the interest is not the 18.5% CIBC claims it to be on the statement. The actual interest for that period worked out to be 92.4% per annum. My friends faxed a memo to CIBC asking why they were charged this interest for the period of time the amount due was already paid. CIBC has responded offering to reverse the credit charges as a good will gesture because the account is normally kept current, yet were silent about charging interest on the paid amount.
The point of this blog is to remind everyone just how the credit card companies’ policies are usurious and the drastic effect that can have on your wallet. If you were late on a small amount and then charge a significant purchase to your card it would incur a substantial interest charge that is totally inappropriate. We know the governments will not fix this. Maybe it is time for the consumers to protest by boycotting one specific card company for an entire month. We would pay our accounts on time, however we would not use their card to charge anything for that month. That would hurt them where they pay attention. It might even cost the Vice-President of that division his/her huge annual bonus! What are your thoughts?
| Article Tags :: american express | CIBC | credit card | interest charges | MasterCard | RBC | ripoff | TD | VISA | |
My friends advised me that in spite of CIBC’s assurance in writing that they would reverse the credit charge as a good will gesture, in fact they never did. To add insult to injury CIBC charge additional interest on the same item. So much for customer service!