Tuesday, November 11, 2008

Banks: How They Sneak Charges Behind Your Back

I learned something new today. Unfortunately it is costing me Php500.09 which I have yet to earn. You can only imagine how painful it is to pay for that amount, knowing that I did not get anything out of it other than this article and a few wrinkles.

So let’s get down to business.

Credit card companies often tell us that they charge 3.5% monthly interest rate whenever we fail to make full payments of our month’s bill. Little do we know that banks do their magic when computing for the 3.5% they claim to charge—the figure, I believe, they come up with for press release.

I failed to pay in full my last set of purchases with a bank which if we were in Aristotle’s time will be called Polis-bank. But being the good payer I was, I paid my minimum amount due, even a few pesos over it, just to show I haven’t forgotten my responsibility even if I am a little short on cash these days. I was ready to take the consequence for not paying the full amount, the consequence I understand thanks to the sneaky press release.

But then here I am flabbergasted by the legal hanky panky going on in the credit card world.

The truth is, I didn’t have to posses my depleted mathematical prowess to compute 3.5% of last month’s total amount due. Php500.09 clearly is too much.

Unfortunately for my bank, I have all the time in the world to ask them my loads of questions. It didn’t help that I am in a state of semi-poverty, that every cent in my pocket and my bank, I make sure I account for. So I called them and requested that they walk me through how they arrived with Php500.09.

First explanation of the agent at the end of the line was the 3.5% they were referring to as the monthly interest rate is actually 3.5% of the total amount due for the month you were not able to pay in full. The partial amount you paid even if it is above the minimum amount due they set is included in the computation of the darn 3.5%.

Therefore, there is no point in doing partial payments when it is not subtracted from the total amount due before the account owner is penalized. If my total amount due was Php100.00 and the bank sets Php30.00 as my minimum amount due (there is no clear formula for setting the minimum amount due either. They say there is but I tried computing. Their press release formula in inconsistent with their actual figures), then if I pay Php50.00 and let the other Php50.00 pass, you’d expect I’d be charged with P1.75 (3.5% of the unpaid amount). But no! According to the first point raised by the agent I talked to, they compute it as 3.5% of Php100.00 (my total amount due for the banking cycle I supposedly screwed up). The finance charge will now be doubled and become Php3.50 instead of the expected Php1.75.

Given that principle, I computed 3.5% of my total amount due, regardless of the amount I was able to pay for the banking cycle I allegedly screwed up. Again, I didn’t have to be a math genius to realize that the Php500.09 they were charging me was still way beyond my 3.5%.

So I say, “huh, but the Php500.09 is NOT 3.5% of the amount previously billed on my name?”

The agent then says that actually their way of computing is more complicated than I think. She told me I can check out the back of my bank statement for the formula I was squeezing her for. I looked but it wasn’t there. I think you cannot blame me for smelling something fishy. She goes a bit defensive and insists I am lucky the bank did not add any late charge on my bill. Therefore if a client was devoid of luck, s/he will have to face the mysterious finance charge AND a late charge (the computation of which can be more mysterious, for all we know).

Objectively speaking, I am one of the calmest callers in the world even if irritated. I think I even had more patience than the agent I was talking to. In the most humble way, I requested her to breakdown to me the computation for the Php500.09 because I was about to pay for it, and it really didn’t feel right to pay for something I don’t understand.

She says she can fax it to me. I told her I didn’t have access to a fax machine. I asked her to email me instead. She said she can’t email me even if I get emails from them every month for promos my lifestyle cannot avail me. She says she can send it to me via snail mail. Great! My Php500.09 would be long gone by then being that last day of paying for this banking cycle is a good five days from now, and I have no plans of leaving any of the pesos I owed them pass. But I acceded. At least there is hope in shedding light to the finance charge mystery even if it'll come late.

Still, I can’t help but feel that banks do have a way of sneaking up on you, especially when you are too passive (or rich) to notice. I have yet to check my other banks for their policies. Consider it as my personal investigation.

And if by any chance I am in the wrong here, if assuming that the 3.5% monthly interest rate banks broadcast has a whole lot to do with computing for the finance charge is completely erratic, then I am less informed than I thought. To think I have been a credit card holder for almost four years now. And I read fine prints even if I suffer from myopia and I have to decipher paragraphs with a font size of 4. Actually fine prints are fishy.

A friendly advice, if you want to spare yourself from the same predicament I am in, make sure you pay every cent due you per month. That way banks can’t OVER charge you with something you did not spend.

An advice for the wise: Always check your bills. You’ll never know what unnecessary charges banks will bill you with. It happened to me once. The bank apologized and blamed their system for generating an amount from nowhere. They reversed the amount. I didn’t have to pay for it. But I might have paid for it if I way to carefree to check.

You see how unjust things are? If you screw up, you literally have to pay for it via the stinky charges. If the bank "slips," they say sorry and their absolution don't cost them a cent.

Hmm…Sneaky! Sneaky.

1 comment:

Anonymous said...

This happened to me before and I insisted on knowing how they computed the charges until the manager came to the phone and explained it to me. They actually charge you the interest FROM THE TIME OF PURCHASE. So you are actually paying more than one month's interest. I agree with you wholeheartedly about how unfair it is that they charge you interest for the whole amount regardless if you paid half of it. These banks are ripping off all their customers. Isn't there some way that they can be regulated so they can't charge exorbitant fees?