Paid-off Credit Card Reminder!

This is nothing new but I think a reminder every once in a while is good for these small mishaps that can quickly balloon. Long story short, just because you pay-off a credit card does not mean you can forget about it!! You don’t want to miss a payment, triggering high interest rates even on unrelated cards, because of a unknown-to-you charge on the card. Some of these could be: membership fee, accrued interest, awards program fee, etc.

All completely legitimate charges which you signed up for and are responsible for. Of course if a card is stolen and charges are placed on it you would want to know right away as well.

What Triggered It

I recently paid off one of my credit cards which had about a $1,000 balance. I paid the card online a couple days after the statement date and well before the “grace period” date. I wanted to get it out of the way as soon as possible. One card down, many more to go I was thinking, but you cannot forget it the account! I check all my accounts online regularly, at least weekly, sometimes up to three times a week. When the next statement comes out I’m expecting a nice $0 balance. Well, it turns out I owe $3.11 from accrued interest charges. Many cards use double-cycle billing which calculates interest based on a 2 month span. This means your card is not truly paid off until 2 billing cycles after you paid it.

Possible Disaster

This didn’t break my budget or even really surprise me very much but it served as a great reminder of why debt is bad. If I had no other debt, I would not care what my interest rate is or if it was to suddenly change. If I had deleted the web link for my account from my Firefox toolbar and then forgot to check my account, it certainly could have spelled disaster. This account would charge me a late fee, probably in the $30-$35 range for missing the payment. Most likely, they would also report it onto my credit report, unless I happened to catch it only a day or two late. This could also cause interest rates on my other cards to skyrocket as well. It’s entirely possible my other credit card with a balance of $18k at 3.99% APR could have jumped to a 20% or higher APR. This would have changed my monthly minimum payment from a manageable and budgeted ~$200 to well over $500 a month.

What to do?

If this happens to you, you need to get on the phone with the credit card company ASAP! Hopefully it’s the first time you’ve ever been late with them and within a day or two of the past due date. A small balance as in my case would probably help as well. Explain the situation to them and tell them you’re willing to make a payment right now over the phone. This usually incurs a fee of $15-$20 but it is well worth it. In exchange for making the payment immediately, you’ll want to make sure they will not report this as a late payment to the credit bureaus. It would also be nice if you could persuade them to waive the late fee, but your priority is keeping your credit report clean so other credit cards do not hike their rates further.