My husband and I had an extensive conversation yesterday regarding the status of our debts, income, and what our plans are in the future, as it applies to finances. I told him that we're basically treading water; for every $1000 I pay off in a month, we charge $1000 more. I told him that I want to go to a cash based budget until we're able to pay off our credit card debt so we can better manage how much we're spending.
This will be a marked change in our spending habits, as he and I have pretty much used credit cards exclusively since we moved in together. We've used cards that offered cash back awards for all of our spending, collecting the cash back incentive, but slowly increasing our debt load as we went along. One of my credit cards offers 1% back, deposited into a savings account that pays 10% interest, and it has a low interest rate too. It is through my credit union and I love my credit union. If we were using these cards responsibly, it would be a great set up. The problem is that we're not using the cards responsibly. We're carrying a balance from month to month, therefore paying interest on this card every month. You would think this is why I'm abandoning cards. It's not.
Instead, I am abandoning credit cards because of my recent dealings with Discover Card.
A little back story; last year I decided that we were going to pay off our credit cards. In order to do this, I completed a couple of balance transfers to get the bulk of our debt onto a couple of 0% interest offers. One of these balance transfers was to Discover Card, which offered 0% interest for 15 months on balance transfers. I calculated out the necessary payments to pay off the balance in 15 months and on we went. In November, I decided to purchase my husbands Christmas gift online. Because Discover Card offered 5% cash back for online purchases, I decided to use my Discover Card for this item and then immediately pay it off the following month. In the paperwork I received with my card, there was a statement regarding payments above the minimum amount that basically said payments would be applied to balances with the highest interest rate first.
And then there was one little line that I overlooked. It said, "In a way that is most advantageous to us."
In January, I paid my entire minimum payment plus extra, enough to cover my minimum payment and the amount of the gift I'd purchased my husband. When I received my statement at the end of the month, it showed that I had been charged interest on $300+ worth of purchases. I emailed the company asking why and they said that the purchases began accruing interest the day I made them, not at the end of the billing cycle, since I already had a balance on the account.
Fine.
I paid additional in February to pay not only my minimum payment, but also whatever outstanding balance I had on my account from January .... basically covering the interest so I was not charged anymore interest on my interest.
On Friday, I received my Discover Card statement for February with an interest charge of $0.50 and the description "Minimum Interest Charge".
I flew into a rage. I have more than paid off the charge from December and they continued to charge me interest. I e-mail Discover through the link on my account page and was basically told that once you make a charge when you have an outstanding balance transfer, you will pay the minimum interest charge of $0.50 for the entire duration of your balance transfer. It doesn't matter that I have more than paid it off, that I've paid more than the minimum every month since the balance transfer occurred, or that my purchase balance is the highest interest rate on my account. Discover Card maintained a purchase balance of $1.56 so they could continue to charge me interest on a purchase that has long since been paid off, and since they charge a minimum of $0.50 per statement, that will be added to my account every month until I pay off the balance transfer.
Needless to say, my relationship with Discover Card will be ending once the balance transfer is paid off. Although I was assured that I won't see an interest charge for the duration of the balance transfer if I don't use the card for additional purchases, the shadiness of the business practice has soured my opinion of Discover Card as a company.
