THE BLOG
11/13/2012 04:01 pm ET Updated Jan 13, 2013

Credit Card Tricks and Traps: How We Were Charged a De Facto Rate of 119,100 % on our TJX MasterCard!

Co-authored by Gary Ferdman

We knew something was amiss when we received a TJX Rewards MasterCard statement indicating that we owed $11.92 in interest payments when we had paid our previous bill in full.

Here's the story.

Back on June 17th we bought two Adirondack chairs and some lamps at a Home Goods store. Signs advertised that by opening a TJX MasterCard we would save 10%. We went for it.

On July 16, we paid our first bill in full over the phone including a $25 late fee -- we had misplaced the original statement, and thought we must have missed the closing date. A few weeks later, another statement arrived -- our new balance of $11.91, was due by August 11, or a late fee of up to $35 would be charged.

It made no sense. How could we owe anything when we had paid our bill in full? Another phone call led to a supervisor who explained that when we paid over the phone, the TJX employee took out $605.52 when we owed $605.53, so we were left with a one penny debt! TJX's 26.9% interest charges are based on the average daily balance of the billing month, so the balance we owed before the bill was paid was included -- we owed a penny but we were charged interest on an average monthly balance which, including that penny, came to $591.38! Confronted with our outrage at being charged a de facto 119,100% interest rate on an unpaid balance of one penny, she waived the $11.91 interest fee.

This fiasco led us to take another look at the $25 late fee we had paid. One more phone call revealed that while TJX's billing period is 31 days -- we had paid the bill over the phone within 30 days -- their billing cycle is 23 days. If payment is not received within 23 days of the purchase a late fee is charged. The agent readily admitted that many customers found this discrepancy confusing and got charged a $25 late fee.

We had the time and energy to investigate rather than pay just to get TJX off our backs. But the stores -- TJ Maxx, Marshall's, and Home Goods -- offering the TJX cards attract many working class people, who between long hours at work and raising children have little time or energy to spend arguing with TJX. No doubt many immigrants whose English is minimal also use the card. We paid $25, got the interest and our penny waived, and threw out the card. We can only imagine the Kafkaesque credit card web that those customers who can the least afford it, must get caught in -- by TJX and many other credit card companies.

Two years after the implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009, not much has changed.

In a 2010 issue of the Herald Tribune, business columnist Ernest Werlin, a former Wall Street senior executive, brings together comments from several members of congress that help us understand why this is so: The bill's Senate sponsor, Chris Dodd (D-CT), blamed bank lobbyists for weakening its provisions. Vermont Senator Bernie Sanders pointed out that the financial services industry has five lobbyists for every member of Congress. Illinois Senator Dick Durbin told a Chicago radio station that the banking industry "frankly owns the place."

Senator elect and staunch consumer advocate Elizabeth Warren could not have been more right when she pointed out that there are "a lot of tricks and traps in those [credit card] contracts." She has the intestinal fortitude to stand up to the banking industry and advocate the passage of meaningful reforms. Hopefully she will be able to influence her congressional colleagues to reject the lure of special interests and stand with her.

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