Thursday, January 14, 2010

Credit Card forward calculate interest

If you have a remaining unpaid balance of $0.01 in your credit card from last month,
and then you use $1,000 this month ...

You may think the interest 18% should be imposed to your 1 cent balance which is ignorable but in actual fact, the interest is calculated based on your future expense as well. So ...

$1,000.01 x 18% -> pro rate to 1 month => $15

See the magic of finance ? You could get charged $15 from your $0.01 remaining balance. Despite your $1,000 usage is not even due yet !

A handful of local banks are already exercising this interest forward calculation method. Most of the international banks on the other hand agree this is ridiculous and didn't enforce this calculation on small remaining amount.

But recently banks lose many credit card accounts so they are quietly imposing this again to upbeat some profits.

Many good card users are caught only after some time because they just couldn't believe such a ridiculous abusing technique can exist around us for more than 2 years already.

When inquired if banks have approval from Bank Negara to do this, a very ambiguous respond is given. Apparently when banks were gaining approval for "multi tier interest", this forward calculation method is part of the small clauses. It is unknown if BNM was just being sloppy or they just quietly pass it through.

Either way, you should have another proof that the big guys will NEVER take care of your personal finance.




8 comments:

TheCurious said...

Hi,

Can you raise this up to BNM ?

Michael Tsen said...

already submitted

Sue Ellan said...

Hi,

Thank u for highlighting to us. When I check my credit card statement last month, Maybank use this method. And this trigger to me.

Many thanks to u for your effort. I really appreciate it.

Michael Tsen said...

You are welcome.

A lot of users feedback to me offline as well. Actually some of them are relatives of the bankers themselves ( funny huh ? ), they did ask the bankers about it and the bankers did explain the same thing to them. Just that they explained in a very complicated way that consumers just couldn't understand it until they read this article.

I guess when someone cheats your money, they will 'explain' in a very justifiable way ... hence make things seems complicated.

Sue Ellan said...

Sir, I got info from a friend.. please click at the url below and item no 6:-

http://www.maybank2u.com.my/mbb_info/m2u/public/faqList.do?channelId=&faqChPath=/mbb/FAQs/01-Personal%20Banking/FCRD-Cards&cs=1&programId=CS-CustService&faqId=CRD01.10-ReductionInterestRates&chCatId=/mbb/Personal&faqChId=FCRD-Cards#117114

TheCurious said...

Hi Michael,

BNM gives no response yet ?

Michael Tsen said...

no written response yet but overall result is not positive. Its one of those things we can't 'fix' but we can only avoid them. there may be a future post about the details and clauses etc.

Michael Tsen said...

The link provided by Sue above has very good details, most other banks have similar clauses ... basically the whole project was made as if it helps consumer with lower interest etc. But the loop hole is shown clearly in this article ...