Consumer complaint received 2015-09-30
Company: NAVY FEDERAL CREDIT UNION
State: OH
Product: Credit card
Issue: APR or interest rate

Complaint:
There is a workaround banks are using to earn finance charges. A {$5.00} charge that is paid in full by the statement due date accrues no interest. A {$10000.00} balance transfer at 0 % carries month to month within the promotional period accrues no interest. As independent transactions this holds true and correct. However, if during the 12 month 0 % promotional period for the same {$10000.00} if the same {$5.00} purchase occurs the consumer now must pay {$10000.00} dollars by the statement due date or be assessed finance charges on the {$5.00}. GOT-YA clause essentially. They stipulate the entire statement balance must be paid to not accrue finance charges in order to either circumvent many of the intentions of the Consumer Credit Act of 2009 or the banks threw enough money at lobbyists in order to leave this sort of a loophole for them to exploit. Given this scenario with a statement balance of {$10000.00} the consumer makes a payment of {$250.00}. In accordance with the Credit Act they will apply the payment to the highest interest rate first which means that {$5.00} purchase is being paid by the first statement due date following the purchase. Since there is a remaining balance left on " the statement '' of {$9700.00} they can apply finance charges. So despite the balance transfer and purchase transactions being independent and XXXX has nothing to do with the other because they exist on the same single account the banks will penalize the consumer with finance charges. It 's apparent and obvious this was devised in order to still reap profits through shady fine print details. The Credit Act should be amended to stipulate that new purchases or new cash advances can not be stipulated based on a lower balance transfer promotional offer existing. Essentially forcing segmentation exist within the singular line of credit. This retains all existing rules but breaks this loophole. Not only will payments apply to the highest interest rate but under any circumstance in which a new purchase or cash advance occurs the payment is applied to the newest transactions first and finance charges can only be applied to the carries balance. Break that down so in month 1 the consumer uses a balance transfer of 0 % for 12 months on {$5000.00}. In month 2 the consumer makes a {$200.00} purchase and on the next statement in which the {$200.00} is shown the consumer makes a payment of {$300.00}. This covers the {$200.00} purchase and this no finance charges may be assessed and the remaining balance is {$4900.00}. In month 3 the consumer makes a purchase for {$1500.00} and on the next statement in which this {$1500.00} is shown the consumer makes a {$1000.00} payment. The bank can only apply a finance charge based on the remaining {$500.00} balance carried over from the {$1500.00} purchase. In month 4 the consumer has no new transactions. The previous month balance is {$5400.00}. The bank can apply finance charges on the accounts daily average balance " of purchases '' or {$500.00} for that month. The consumer makes a payment of {$2400.00}. This pays off all purchases and no further interest can be assessed. In month 5 the account balance is {$3000.00} plus the accrued interest on the previous months carried balance. The consumer makes a payment in month 5 that covers the interest amount and then some additional toward the remaining balance transfer amount. In month 6 all that remains on the statement is the remaining balance transfer amount. This is what 's right and prevents banks from leveraging the balance transfer as a way to sneak in finance charges. Consumers should not have to dissect things in order to realize that they really need an entire account solely used for balance transfers and another account for purchases/cash advances. This forces a situation where consumers must have multiple accounts and catches consumers in unintentional finance charges due to the legal verbiage used.

Company public response: Company believes it acted appropriately as authorized by contract or law
Company response to consumer: Closed with explanation