Here's How Credit Card Companies Gat A Bad Name

Filed in archive Credit on September 28, 2007

(Yes, I know I wrote "Gat" in the title of the post; it's just a mistake. You ever make a mistake?)

Here's a quiz. Read this passage from one of my credit card statements this month, and tell me what my credit card minimum payment is if my balance is $357 and I have no previous balance and no over-limit charges or late charges:

To calculate the Minimum Amount Due, we add together the following amounts, round the result to the nearest whole dollar, and then add any amount past due:

(1) the greatest of:
(a) 2% of the new balance (excluding from the New Balance any over-limit amount and any late fees or over-limit fees);
(b) the lesser of:
(i) current billed Finance Charges plus 1% of the New Balance (excluding from the New Balance any over-limit amount, any late fees or over-limit fees and finance charges), or
(ii) 4% of the New Balance; or
(c) $15;
(2) any over-limit fees added during the billing period;
(3) any late fees added during the billing period; and
(4) 1/24th of any over-limit amount (the part of your New Balance in excess of your credit line).

OK, I'll make answering this easier by making it multiple choice. Is the answer:
(A) $3.57
(B) $7.15
(C) I have no freaking clue.
(D) Dude, it's Friday, I'm done thinking for the week.

If you answered C or D, you are correct.

You would think that with Congress breathing down their necks, the marketing departments at credit card companies would be screaming at the actuaries (or whatever geniuses came up with that formula), "We said LESS complicated! LESS!"

Amazing.