CapitalOne Finance Charge Overlimit Fee Generator

If you are a CapitalOne credit card user there is a trick they use that you should know about. Unlike many other credit card companies who apply their finance charge immediately after your payment is applied, they save the finance charge until the day of the next statement. If the user spends up to his credit limit during the month, the finance charge is then guaranteed to generate an overlimit charge. Here is an example:

My credit limit is $5000.

On December 28 my balance is $4995.

On January 15 I make a payment of $78, balance = $4917, available credit = $83.

On January 24 I check my available credit and make a purchase of $61, balance = $4978, available credit = $22.

On January 27 CapitalOne charges me finance charges of $29, balance = $5007, plus an overlimit fee of $39.

On February 15 CapitalOne will get my payment, at which time my account will have been overlimit by $7 for 19 days so that $39 fee works out to an annual percentage rate of over ten thousand percent.

This kind of practice will likely become more widespread as some of the other shady practices of credit card companies have been eliminated by recently enacted legislation.