June 30, 1999

How to pay 650 percent in interest, legally

Being an intelligent person, you probably do your best to pay your Visa or Mastercard in full each month to avoid the atrocious interest rates we have all come to associate with those deceptively handy pieces of plastic. So do I.

The other day I discovered another way that Wells Fargo Bank was attempting to turn me into one of their better profit centers. If I had not called them up and argued the point, I would have ended up paying them at the annual percentage rate of (are you ready for this?) 650 percent. That's not a misprint, nor was it the bank's mistake. Evidently it is their legal right. And it could have been much higher.

Bottom line: unless you pay off your monthly Visa bill completely, down to the last mill and farthing, Wells Fargo (or, I assume, whatever credit card company you deal with) will charge you interest on the entire bill. If you pay them only 90 percent of what you owe, you will still owe them interest on the entire amount. Unless there is something I do not understand or something I should be doing I'm not doing, either you pay off completely or you are better off paying the minimum allowed, because you will be charged ALL the interest regardless.

Here's how my situation laid out. I got a Visa bill for $364 and change. I noticed something on the bill for $12.50, a magazine name with an 800 number attached. I called the 800 number, and learned there was an unauthorized automatic renewal of a magazine subscription I had been getting. I don't believe in negative options, where the Book of the Month club or something like it sends you books or cassettes unless you tell them not to do it or somebody sends you a free CD you didn't want and adds $14.95 in shipping and handling fees. The anonymous magazine person at the other end of the line agreed to cancel the $12.50 bill and the subscription, so I deducted it from my Wells Fargo Visa bill and that was that. Except that the next credit card bill wanted 6.56 in interest. True, they were charging only about 15 percent, but it was on the whole $364, and I had already paid them over $350 of that, so I was really getting billed 6.56 for a month's interest on $12.50. Multiply 6.56 times 12 months, and they wanted 650 percent interest.

See that little mouse who's discovered the cheese on that trap. Ooh! I can't bear to look. splat!

I have also discovered another way to become a credit card company's profit center. Mislay your bill for a couple of weeks and don't send in the $10 minimum within the deadline. But, you say, I've paid huge bills in full each month and always well within the deadline. Doesn't matter. Each month is a new adventure. Pay off your bill to Discover card each month for a year, then forget to pay the $10 minimum within the deadline once and you'll be stuck with a $29 penalty.

Perhaps it would be simpler to cut up the credit cards and deal in cash. Pickpockets and strong arm robbers can only take from you what you are actually carrying.

If you wish, you're welcome to read some previous Reactor columns at Paul Azevedo's website, http://www.thereactor.net/ or you can e-mail him at Paul@thereactor.net