The Good Life on a Budget

• Posted by JvW on December 1st, 2007 filed in Uncategorized

Back in August, I messed up and paid one of my credit cards late. After a few phone calls and back and forth, the late fee was removed (twice, then one put back) and I was promised that my interest rate wouldn’t change. Which it didn’t- the interest stands at 12.49%, making it my lowest rate of all our credit cards. In fact, while writing this post, I realized that the interest rate has dropped from 12.99% to 12.49%, without me having to ask.

What has changed on this account is our minimum payments. I pay attention to the minimum payments because, as our smallest interest rate in the snowball, that’s all I pay. Right after the late fee drama, the minimum payment was off by one late fee ($39), and totaled $171. Then the following month (October), the payment was still high, at $164. This was completely unexplained.

Logically, as more payments are made, the principle will decrease, and the interest earned will also decrease over time. As most credit cards charge interest on the average daily balance, days with longer months will have slightly higher interest charges than shorter months, thus creating a variable interest amount built into the minimum payment. So I checked out the interest charged in August (for September’s payment) and September (for October’s payment). They were $70.49 and $64.78, respectively. I think this is why the interest rate dropped from $171 to $164. Now we’re getting somewhere.

Except… in August, the minimum payment was $133. So October’s minimum payment should have been somewhere close to that. And then November’s minimum payment was $128, and the new bill for December has a minimum payment of $122. Why does this have to be so confusing?!?

I think that, quite simply, BofA made a mistake in calculating October’s minimum payment. Maybe it was a result of Sepetmber’s mix-up, or maybe it was just a glitch. In the long run, it doesn’t make that much of a difference, and the money was applied to the principle, so it’s still going to the debt payoff. What really disturbs me is that the minimum payment can change so drastically. While my budget allows for such fluctuations, it could be detrimental to someone who is under tighter financial restrictions. What is really disturbing is that I couldn’t find how my minimum payment is calculated on the statement, nor was I able to find it on their website. I hope it’s there somewhere and I’m just missing it - otherwise it leaves me with a very uneasy feeling.