Beware of BMO MasterCard interest charges

[Raven_007]

If you ever miss a payment, you will be charged the interest from the date of purchase on all purchases until you payoff balances on time for two month (during which you are being charged interest). This is recent change, so check you statements. I missed my May payment by 5 days, that's how I know it, so I called BMO and that's what the rep told me.

This is pretty lame of them to do, but that's how it is.

[ynot]

I've always understood that all credit card companies do it this way.

[Dibble]

If you ever miss a payment, you will be charged the interest from the date of purchase on all purchases until you payoff balances on time for two month (during which you are being charged interest). This is recent change, so check you statements. I missed my May payment by 5 days, that's how I know it, so I called BMO and that's what the rep told me.

This is pretty lame of them to do, but that's how it is.

This is standard mate.

The grace period for when to pay the payment by is not an "interest-free period" -- it just means you won't be responsible for any interest charges that may occur during that period if u pay within that period. If you miss your payment by a day, you're interest charges will be AT LEAST the period of your grace period.

[gedwards]

Agreed. I have had the BMO mastercard for at least 7 years and it has always been that way. So has every other credit card I have seen.

It is not really lame but makes sense. When you use a credit card you are borrowing money from the credit card company (similar to if you had a bank loan). The day you actually buy something is the day you start borrowing the money from the credit card company so interest should start at that point.

Keep in mind that every other month you have used your credit card and paid on time you have been able to borrow money from your credit card company for many purchases completely interest free.

[Dibble]

Infact, it should say so in the agreement package you receive when you sign up for the credit card.

[thelefteyeguy]

here's something else i should teach you...if you dont know

even if you pay part of the amount...or even if you pay up to $0.01 (ie Balance $100, and you pay $99.99)...you are still charged interest on the whole amount ($100 x rate of interest x number of days from last statement to current date).

[dark169]

here's something else i should teach you...if you dont know

even if you pay part of the amount...or even if you pay up to $0.01 (ie Balance $100, and you pay $99.99)...you are still charged interest on the whole amount ($100 x rate of interest x number of days from last statement to current date).

thats not always the case, some cards calculate intrest on the daily average balance.

Another thing to watch out is if you miss or are late with payments 2 months in a row its pretty common for your intrest rate to change from 18-19% upto 28+% until you get your accuond back in good standing.

[tkyoshi]

If you ever miss a payment, you will be charged the interest from the date of purchase on all purchases until you payoff balances on time for two month (during which you are being charged interest). This is recent change, so check you statements. I missed my May payment by 5 days, that's how I know it, so I called BMO and that's what the rep told me.

This is pretty lame of them to do, but that's how it is.

That's not uncommon, though if you've been a good customer and this is your first time missing a payment you might be able to get them to waive the fees this time. This happened to me once, I paid the wrong bill, and called BMO and explained the situation and they reversed the interest for me and counted the payment "on-time".

Interest rate raises aren't as common in Canada than in the US. In the US being late one one card could cause all your other cards' rates to jump as well.

Some companies like CIBC Visa are even worse, if you miss a payment they use the 2 month rule PLUS they charge you interest on the last 2 months. So instead of this month's balance interest, you also get dinged for the amount you may have paid off last month. It hits you harder if your previous month's statement was very high.

[gman]

Actually, it is uncommon if the a CC does not do this. ;)

[Raven_007]

Actually, it is uncommon if the a CC does not do this. ;)
Well, if you make payment on June 3rd instead of May 30.
Your purchases in June would be charged interest from the day it is applied to the account.
Your purchases in July would be charged interest from the day it is applied to your account.
If you payed your May statement in June on time and your June statement in July on time, then it goes back to normal.

I understand that interest is how credit companies make monwy. I think I missed the payment over the past 5 years a few times (maybe 3 or 4, and I remember it was late payments two consecutive months), but this 2 month thing was never applied. I think I'm in a decent standing as they keep on increasing my limit without me ever asking them (I always pay the amount in full). When I called the rep told me that this is recent change for them. I didn't know about CIBC and other banks doing this. Thanks for letting me know and hopefully it helps someone else as well:)

[gman]

Well, if you make payment on June 3rd instead of May 30.
Your purchases in June would be charged interest from the day it is applied to the account.
Your purchases in July would be charged interest from the day it is applied to your account.
If you payed your May statement in June on time and your June statement in July on time, then it goes back to normal.


This is not exactly correct. If you make payment of June 3rd instead of May 30, your May purchase will be charged interest. If you did not purchase anything between May 30 and June 3rd and you are smart enough to pay extra $10 (or whatever amount that can cover the interest and more) on June 3rd to your account, you will have no extra interest charge afterward. The key is to make the balance to $0 or actually positive before you use the card again.

On the even more safe side, I usually just make it positive and stop to use that card for a month.

[dolphie]

Another thing to watch out is if you miss or are late with payments 2 months in a row its pretty common for your intrest rate to change from 18-19% upto 28+% until you get your accuond back in good standing.
I didn't think this was allowed in canada. anyone?

[gman]

I didn't think this was allowed in canada. anyone?

Which part do you think is not allowed?
Changing the interest rate (as the agreement states) or interest rate to 28%?
I think both are legal.

[tkyoshi]

I didn't think this was allowed in canada. anyone?

Well I don't think it's against the law, but you won't really see it happen in Canada as basically all cards have a FIXED rate. Unlike the US where it is variable (e.g. Prime + up to 23%) everyone gets the same rate. Rates are not customized for you. The banks though do have the right to change the interest though.

This does not include promo's and such but based on your credit, if you both sold say a BMO M/C (since we are talking about it in this thread) a person with a high credit score and a person with a low score (but good enough to get the card) will have the same interest rate which is currently 18.5%. Now of course the person with the high credit score will probably get a higher limit and will recieve promo's such as 3.9% on Balance transfers, the standard interest rate is the same.

In the US if you both hold the same card one of you could have a Prime + 12.9% and your friend might have gotten Prime + 7%. There are a set number of rates (typically around 5 different tiers) and based on you as an individual you will get one of those rates. Now as I mentioned earlier, the evil thing is that if you miss a payment on one of your cards, the other banks have the right to increase your rates as a result.

Example - I will use 1 Visa and 1 Mastercard just for an example same principle applies if you had say 3 Visa or M/C only, etc...:

Say on the Visa you had 15.9% Annual Rate and on the M/C you had 7.9%. Now if you happened to miss a payment on your Visa, they may jack up your rates to say 21%. Now what is evil is M/C might see that you missed a payment on your Visa and despite you never missing a payment with them they might jack up your rate too because they might see you as "higher risk".

Therefore Variable and Fixed rates have their ups and downs, I think the fixed rate overall is a much better system. In the US you are lucky if you can get a card with a fixed rate.

This is also why you see a lot of promo offers for cards in the US (e.g. 1 Year 0% APR on all purchases, etc...) because they will get you hooked then hope you can't pay the card off and then slam you with a terrible rate. They love this because they don't have to disclose the interest rate they are going to charge you after the promo period. They get to decide at the end of the year or if you violate the promo terms by say missing a payment.

[Raven_007]

This is not exactly correct. If you make payment of June 3rd instead of May 30, your May purchase will be charged interest. If you did not purchase anything between May 30 and June 3rd and you are smart enough to pay extra $10 (or whatever amount that can cover the interest and more) on June 3rd to your account, you will have no extra interest charge afterward. The key is to make the balance to $0 or actually positive before you use the card again.

On the even more safe side, I usually just make it positive and stop to use that card for a month.
Hmm, that's an interesting idea, didn't know about it.
I actually overpaid my June statement and took all of my expenses to another card, so I'm not getting any interest charges this month, but the rep told me that's because the account is overpaid,but did not say clearly what happens if I use more then what I overpaid in the same month (July in my case), he just told me about the 2 month rule.

[dark169]

Well I don't think it's against the law, but you won't really see it happen in Canada as basically all cards have a FIXED rate. Unlike the US where it is variable (e.g. Prime + up to 23%) everyone gets the same rate. Rates are not customized for you. The banks though do have the right to change the interest though.

Read the terms and conditions for your card I cant pretty much garuntee its there. Its there for my AMEX, my 0% citi MC and my TD visa. If you dont make the minimum payment on time for 2 months in a row your rate will be increased. If you cant find your terms/conditiosn dont pay for 2 months and find out

[tkyoshi]

Read the terms and conditions for your card I cant pretty much garuntee its there. Its there for my AMEX, my 0% citi MC and my TD visa. If you dont make the minimum payment on time for 2 months in a row your rate will be increased. If you cant find your terms/conditiosn dont pay for 2 months and find out

Can you post a snippet for TD Visa and Citi MC? I looked briefly, and there doesn't seem to be anything there for defaulting for more than 2 months. The only thing that may happen is you loose your promo rate which is a given. This is on contrast to say Bank of America's Visa which actually says:

"If at any time during any rolling consecutive twelve billing cycle period we do not receive two Minimum Payments by your payment due date or you exceed your credit limit twice, we may elect to automatically increase any and all of your standard APRs to the Penalty APRs. Your Penalty APRs on all existing and future unpaid balances will automatically revert to the standard APRs disclosed above if you make six consecutive minimum payments when due and you do not exceed your credit limit within the same time period."

Variable APR, currently either 12.24%, 14.24%, 18.24% or 21.24% (Prime + 3.99%, 5.99%, 9.99% or 12.99%)
Penalty APR: A variable APR, currently up to 32.24%.

Prime is currently 8.25% in the US.

Anyway that wasn't really my real point, I was just emphasizing that most CC rates are fixed rates here in Canada, they are not variable. Even a prime rate change will cause your credit card interest to change in the US.

[NeilMcduck]

Some companies like CIBC Visa are even worse, if you miss a payment they use the 2 month rule PLUS they charge you interest on the last 2 months. So instead of this month's balance interest, you also get dinged for the amount you may have paid off last month. It hits you harder if your previous month's statement was very high.


I often get notes on my CIBC statements telling me that "making a payment this month is optional"...maybe they're trying to bait me into starting a bad habit so that they can reap the interest down the road...

I always wondered why they would tell me to intentionally miss a payment...it all makes sense now.

[nolookingca]

Some companies like CIBC Visa are even worse, if you miss a payment they use the 2 month rule PLUS they charge you interest on the last 2 months. So instead of this month's balance interest, you also get dinged for the amount you may have paid off last month. It hits you harder if your previous month's statement was very high.

Where does it say that? All I'm seeing is that they charge you interest next statement if you don't make the full payment on the current one.