This post was inspired by Ramit Sethi’s series The Money Diaries: real stories of people’s spending habits. Here is my real story about credit card confusion.

I recently made a late payment on my non-credit union Visa. Since it was totally my fault (I simply forgot to pay it on time), I didn’t argue the fee which was a hefty $39. A few days later, I checked online to see if my payment went through and was annoyed to see another fee: an $8 finance charge.

I work at a financial institution and should probably know what a finance charge is and how it’s calculated, but this type of knowledge is not vital to my position. As a consumer who always (except for this one time!) pays my balance in full and on time, I’ve honestly never cared about finance charges before. I tried to read the back of my statement to figure it out, but that only made me more confused. I called the bank for help, and the person I spoke with read me the verbiage printed on the back of the statement, verbatim. Not much help, but A- for effort.

At any rate, I finally concluded that the only way I could avoid another charge was to not use my Visa for the next month. Then I’d get my grace period back and everything would be groovy again.

After one month I’ve already grown comfortable not using credit. Fear probably has something to do with this new habit. I’ll admit I’m afraid of huge fees and charges it takes a PhD to comprehend. I don’t like how one mistake can cost me nearly $50. I’m lucky the interest rate on my card didn’t skyrocket or that they didn’t lower my credit limit. I never used to worry about things like this before, but I read articles every week about banks tightening the screws on their customers, even those who pay their bills on time.

Unfortunately, I can’t stop using my card altogether. It’s in my best interest to remain a good customer. If I’m not carrying a balance and not making transactions, I’m not making the bank any money. What if I don’t use my card enough and they cancel my account? I need it to keep my credit score high. I’ve had that card for 10 years now.

I’ve always taken credit for granted. Not in a “spending money I don’t have” kind of way, but more like, “it will be there when I need it.” Even though I feel I’m in an okay situation right now financially, this recession has me looking at things in a new light. It’s probably a good thing. I think people should pay more attention to their finances than they have in the past and that we should all be more open to admitting what we do and don’t understand about money. That may be the only way we learn.


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One Response

  1. Nicole Rosen says:

    HI! Maybe this will help you a bit. Since you didn’t pay the payment by its due date; you had to pay finance charges for the period of time AFTER your grace period. Look at it this way. Your statement closes on the 8th of X month. This is for the 30 days before that date, but your payment isn’t due until the 3 or 4 of Y month. The time from when your statement closes to the time your payment is due is the grace period. If you don’t pay the balance it full by its due date; you get to pay interest for that time frame.

    Also, as far as usage goes. If you consistently don’t use the credit card you do run the risk of having you credit limit decreased. You are correct that the average length of your account is a major factor in determining your credit score.

    For my last point in the very long post. 🙂 If you call the credit card company and tell them you simply overlooked the due date; they might just waive that $39.00 fee for you. They understand we are all human and as humans we are prone to make a mistake or two in our lifetime.

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