By  Updated on Wed Sep 17, 2014

Simon Says: Residual Interest Can Haunt Your $0 Credit Card Balance

Simon Says: Residual Interest Can Haunt Your $0 Credit Card Balance

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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.

 

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  • Truetomylove4

    Chase bank said i owed 1000 dollars on Feb. 11. I paid my payment and left a balance of 900 dollars. I paid early on the 2nd. of Feb. before it was due. This bill i received included the interest i owed from Jan to Feb. Now, I did not charge anything in Jan. or Feb. but had a balance in Feb of 900 which accrued interest up until my next statement date charging me interest on the 900 for the month of Feb. to March 11. I paid the total bill off before it was due which they owe me money since they charged me interest up the 11th. I paid early on the 2nd of March. Now, they sent me a bill for 9 dollars saying it was residual interest. I owed nothing past the 2nd. of march and the new billing cycle comes on the 11th of march to the 11th of April. This included a 9 dollar charge for what? I paid the bill in full with the charged interest from Feb. 11 to march the 11th. How can they justify this amount. I simply do not owe them anything but they in reality owe me since i paid every month before it was due even though they charged me the whole month prior. I know this is a scam.

  • mike

    They did the same to me …I paid 2000 off and they sent me 48 dollars for over payment. .then next month charge me 21 dollors on interest on 1084…where the hell did they come up with 1084 …when balance been 1952 for months….assholes

  • vinniesdad

    I was doing research because Chase is doing the same thing to me. I’m happy this credit card is closed and I couldn’t stand them before (they refused to lower my APR despite having a great credit record with them). I hate them even more now.

    • http://www.mybanktracker.com Simon Zhen

      Vinniesdad, note that the residual interest isn’t a surprise charge by Chase — it would have showed up with any other credit card. Again, it is simply because a portion of your balance was outside of the grace period when you paid off your entire balance.