Q: I just recently paid off a $700 balance at Capital One in full to a $0 balance. All of a sudden 3 days later, I look at my statement that maybe they raised my credit line. No! Now, I have a $11.35 charge on my account that has no reason or cause to be there. No fees, no transactions, nothing. What is this ghost balance?
– Seth H.
A: Seth, first off, good job on ridding yourself of this particular credit card debt.
The “ghost balance” that you’re referring to is called residual interest. You incurred these interest charges because your now-paid-off balance was not under the grace period. Therefore, you’re still responsible for interest charges on the balance up until the day that the balance was paid off.
Your situation may be better off explained with an example:
Let’s say that your billing cycle begins on the 15th every month and ends on the 14th of every month.
On June 15, you had the $700 balance carried over from the previous month. Then, you paid off the balance on June 25. You make no other purchases and no other transactions occur on your card. Although you end up with a $0 balance on July 14, you still have to pay for the 10 days of interest on the $700 balance, which is what showed up on your statement.
Here’s what the card disclosure for a Capital One credit card states:
Your due date is at least 25 days after the close of each billing cycle. We will not charge you interest on new purchases, provided you have paid your previous balance in full by the due date each month.
So any balance that remains after this 25-day grace period will be subject to interest until the day it is paid off.
Residual interest results when you start the billing cycle with a balance. If you had a $0 balance on June 15, but made $700 in new purchases and paid it off before the grace period ended, you would not face any interest charges.
You’ll stop seeing interest charges after keeping a $0 balance for two consecutive billing cycles.