[JoeS21]

I vaguely remember a situation a couple years ago where one of my credit card balances was increasing by hundreds of dollars everyday. What could cause this?

I was thinking that it was simply the compounding interest rate, but I just asked one of my credit card companies how much interest I would pay on roughly a $700 balance if I only paid the minimum ($25) and waited a month to pay off the rest of the statement balance from last month. They said that I would end up paying about $15 of interest which sounds nearly negligible compared to what I feared would happen. My interest rate is around 18%.

Does anyone know what could cause a situation like the first scenario, where hundreds of dollars were accumulating on a credit card balance every day? (The balance was, at most, $10k, but probably much less.

[(JD)]

One big reason is that when you make a payment, rather than paying the entire balance, the payment is applied to INTEREST and not the charges.

Another thing to remember is that even if you make a payment during the month, they apply interest to the full amount owed before the payment during the month. (Highest owed at anytime during the month.)

Be sure to call again and ask another and then ASK for an adjustment or allowance. Also, while you're on the phone, verify what you APR is and ask for it to be reduced. (They always do this, but if you don't ask, they charge the full allowed by the government.)

[Rose76]

For a credit card balance of less than $10,000 to be increasing by hundreds of dollars every day, without you making new charges, just doesn't sound possible to me. Even a 30% interest rate, higher than most APRs, would add roughly $3000 to your balance annually. That would be a bit less than $300 a month in interest charges. So to have your balance increase by hundreds of dollars a day just isn't making any sense. Was this, like, a VISA or Mastercard account? I really think you are misremembering or misunderstanding something.

[Rose76]

Originally Posted by (JD)

One big reason is that when you make a payment, rather than paying the entire balance, the payment is applied to INTEREST and not the charges.

Another thing to remember is that even if you make a payment during the month, they apply interest to the full amount owed before the payment during the month. (Highest owed at anytime during the month.)

Be sure to call again and ask another and then ASK for an adjustment or allowance. Also, while you're on the phone, verify what you APR is and ask for it to be reduced. (They always do this, but if you don't ask, they charge the full allowed by the government.)

When you make a payment on a credit card balance, they apply the payment toward reducing the total balance. This statement above that they apply the payment only toward reducing interest owed is not true. Your balance isn't divied up into balance due to interest charges and balance owed due to purchases. You have one consolidated balance. It is composed of accrued interest charges and purchases (and possibly cash advances.) It is one amount.

Of course, if you make a payment that is less than the interest charge for the month, then it would make sense to think of that payment as doing nothing other than paying on the interest. That is called paying just to "service the debt." Merely "servicing the debt" means you are not reducing your debt, but just keeping up the interest payments to allow you to not have to begin really paying off the debt.

You can ask a creditor to reduce the interest rate they are charging you. They usually won't. They may, if they think you have the ability to borrow enough from someone else to totally pay them off. The statement above that "they always do this" is not true.

[Nammu]

Obama passed consumer protections so things like that could no longer happen...the current GOP and trump are passing laws to reverse those protections and allow corporate us to rip off the small guy.

[unaluna]

Cash advances have much higher interest rates than regular purchases and are calculated differently..