I do feel like I was "tricked" into incurring finance charges (I can't even remember the last time that I've carried a balance) and I will certainly set up other ways to remind myself to pay. I did call Chase to make my case, but they refuse to even acknowledge that they didn't think of all of the implications of setting people's minimum balance to zero. I am very disappointed that they would opt everyone in as this is a promotion I would NEVER sign up for.

As you say, the person we're discussing is financially uneducated. That is the point.

The bottom line is the banks are offering their customers an opportunity to owe the banks more money, without actually pointing out that is what is going to happen. To me, that is not how a reputable, honorable business should behave. Illegal? No. But certainly the customer utilizing the principals of a representative democracy are certainly within their rights to call for legislation to curb this kind of corporate behavior.

People, credit cards charge interest on the entire statement amount, not the principle balance. Thus, if your statement says you owe $100, and you pay $99.99, you will be charged interest on $100 until you pay the final cent.

It's all smoke and mirrors.

I agree that saying that a person who makes minimum payments does not necessary equal a person who makes poor financial decisions.

But just to come full circle on the concept of this being an abuse of consumers, that same person--one who is financially savvy, but in a bad situation due to job loss or other circumstances--will probably appreciate the payment holiday that doesn't ding their credit as a 30-day late.

This benefits both the consumer and the financial institution.

Pros:
-> Consumer gets to skip a monthly payment, this may or may not be a great thing if they are in really dire straits.

-> Financial Institution gets to accrue interest on a slightly larger balance

Cons:
-> Consumer will be paying interest on the piece of the balance not reduced by skipping a minimum payment

-> Financial Institution does not receive any cash from this account, they continue to be "out" significant amounts of money that have been lent to the consumer with little/no collateral besides the consumer's credit rating

This is not a predatory or antagonistic act by the credit card company, it is an option extended to the consumer to allow some flexibility in a budget.

You have the flexibility to skip a payment. you must pay past due and overlimit [sic] balances immediately. However, the remaining minimum payment for this month has been reduced to $0. Finance charges will continue to accrue. To reduce your balance, feel free to make a payment.

For that matter--I don't understand why this supposedly uneducated financial consumer should assume that a 'payment holiday' / 'skip a payment' offer would ALSO mean that they are skipping interest accrual for that month, the name does not imply that is what's happening at all, and the text of the letter also does not imply that.

Any consumer who feels "duped" by this offer probably has significantly larger problems in their life then then 30-days of interest they are accruing on whatever their minimum payment would have been.

@SlappyWhite: I agree this is a good thing .

What I want to know is why don't the credit cards do this when you miss a payment period . Why gouge the customers with excessives fees and high interest . This is credit card billing in a very simple yet profitable form .

I'm hearing too many stories of people getting gouged and their rates jacked/doubled for being a few days late which in turn makes it harder to pay . And many of those same people are now trying to settle their debt for less than 50% of the balance .

Kudos to Chase for taking this initative . As much as I want to see the credit card companies regulated and penalized for reasons like this I do not .

This is how the average credit card should work . Even if the customers want to skip 3 payments a year and accumulate more interest again it's better than gouging the customer into a bad credit rating . And the credit card companies STILL get to make money .

For those who get the offer, send SOMETHING in - anything, even if it's $10.

It also sounds like a good way for a responsible debt holder to escape a credit card payment for a bit of time while you find a new job or something. Of course, if you're a responsible debt holder, you shouldn't have a large balance to begin with so making your minimum payment or more shouldn't be a big deal.

@secret_curse: " but anyone making the minimum payment on a credit card obviously doesn't make wise financial decisions."

Or maybe they lost their jobs and don't have the extra money, since they have to feed their families? Yay for wide, sweeping generalizations about people you don't know!

@Xerloq: If you just pay the minimum balance on a credit card you'll never get it paid off anyway. It would be much wiser to go ahead and pay what you would normally pay that month, but anyone making the minimum payment on a credit card obviously doesn't make wise financial decisions.

Discover used to do this for me every year in January for free. It was pretty much described as an "oops, you have to catch up because you overextended at Christmas" offer.

I actually think how they wrote out the explanation is clear and very much above board, so props for that. Anyone mature enough to have a credit card should be able to understand it and make an informed decision.

Riiight. Considering the percentage of credit card defaults, they're taking money out of your pocket by taking money out of theirs. Real bright.

I am going to partially take advantage of this offer. My minimum payment is $75 and I am going to pay $50. My paycheck starts getting reduced this week due to a furlough and things are a little tight so I'm grateful for the temporary relief. No lectures on carrying a balance or not having 6 months savings in the bank please

The relationship between the financial institution and the consumer shouldn't be predatory or antagonistic.

@youbastid:
It is not a bad thing as long as it is pointed out that the finance charges will apply as usual, which apparently it does. This is one of those times when the burden of responsibility falls on the consumer.

@Skaperen: Volkswagen Credit does this every year right before and after Christmas. I remember reading that they just tack the missed payment onto the end of your term (no additional interest), but I could be wrong. It's not something I had ever considered doing so I didn't bother to read the fine print.

@tongsy:

Why you'd want to do that is beyond me - why not have the money earn interest for you rather than the bank? By all means, don't carry a balance, but why pay before you have to?

I really can't see the rhyme or reason to tripping the switch - some combination of line total and previous payment ratio is my guess. As I got close to paying off a card with the same monthly blast of cash, the "holidays" got more frequent. HA, like I'm gonna fall for THAT one.

* A person has a card.
* A person has a balance.
* A person receives a statement with an amount due of $0.

It doesn't take a genius to understand that you can still pay more than the minimum amount due.

How much should you make the check out for? However much the total balance is.

But they wouldn't just see $0 on their bill, they would see $0 is the minimum payment due, which is true. They would still be able to see their total balance and any charges they made in the previous month. This isn't as deceptive as you believe it is.

Also, the headline is misleading. Interest on the account would most likely be accruing anyway, so there should be no "instead". Unless you assume that the majority of cardholders pay their balances in full every month. And if you believe that, I have this bridge...

How "generous" of your credit union...

That's a clever way to let your customers balloon their principle.

Paying off your charges as you make them, several times a month, is just plain crazy. You should be taking advantage of the "float", keeping that money in an interest-paying account as long as possible.

You might want to check into whether your bank allows you to set up an auto-pay -- set it to auto-pay the full amount due, on the due date, from an interest checking account, and when you get the urge to pay off your charges as you make them, instead move the money from your high-interest savings to your low-interest checking.

Voila -- free money!

I'm sick of companies like this trying to screw people. Honest dealings, plain language, and courtesy make your company great and get you more business.

I'm going to start a credit card company. On each bill, it will say in big, bold letters what you owe and how much interest you will pay if you don't pay the balance. The interest rate will be 5%. On the card itself it will say "Spend responsibly(TM)".

The wording of the terms seems to indicate that even bad customers ("you must pay past due and overlimit [sic] balances immediately") are being given the chance to skip the payment without further penalty than the interest.

I won't go as far as to call it generous on Chase's part, but it certainly isn't unfair. The terms are disclosed. If you're going to read nothing else on your bank and credit card statements, you should always read the "Important News."

Every interest expense on a credit card is unnecessary. If you can't afford it, don't buy it. The only way to not get screwed by your credit card company is to not have one because they're all evil.

I mean come the heck on. Do we want to protect consumers here, or do we just want to coddle their asses?

I've also heard of some mortgage companies doing this in the past. I guess if they had too great a cash level, they could offer this, extending the term. It's kind of like a way to loan out some more money.

I'd say they did it right. If they preferred opt-in, most people won't even notice there's a chance for them to take a payment holiday.

As to the other people who don't carry a balance (or make more than a minimum payment) they won't be affected by this promotion at all.

Also, per your post, you get a $20 convenience fee AND a finance charge. If you don't mind paying $20 to not pay anything, I can give you an address to which you can send $20 monthly checks. I won't charge you anything for the convenience.

Sounds like an ok deal for the right person (people who carry a balance)

One of my CCs does it this way. Every 12 months I get the option of a payment holiday where I don't have to pay the minimum. Then the 12 month clock starts over. As long as I stay in good standing between times, I can do this once every 12 months. The only reason I know is I've called a couple times when I had a mail snafu (back in the day before online statements) and one of the options they've offered me (in addition to pay by phone, etc.) has been a payment holiday.

I've never taken it -- I pay off my balance in full -- but I imagine people use it a) at Christmas and b) if they accidentally miss a payment. I could see if I had an unrecoverable mail snafu (or, say, Flippy the Fetus chose to arrive at such a time as he totally disrupted my bill-paying and then I spaced on it) it might be easier just to take the payment holiday, pay the finance charges, and continue on with life.

But it's very definitely opt-in.

I actually pay my credit card about 3x a month (because I'm crazy), so I haven't seen anything but "amount due: $0.00" for years. I have to click through a couple extra screens to find out what my current statement is.

Fortunately my APR is low enough to not tack on any significant interest in the skipped month.

It's a bit predatory in that it gets them more finance charges, but at the same time, it really is optional. Opt-in would be ideal. Still, it's a money making ploy that's a lot less predatory than most dealings with credit.

Needless to say, I declined every one of them.