Here’s another reason you should watch your credit card bills closely.

Aside from making sure you are not paying for fraudulent charges made on your card, you should also take a look at the finance charges you are being charged with.

I usually pay my credit card bills in full so that I don’t pay finance charges.  I pay them online through BPI Expressonline.  But due to my own carelessness, I mistakenly paid my HSBC bill to my BPI card.   It was a scheduled payment but I only noticed the mistake after the payment was made.

The first thing I did of course was to call BPI and ask them for my money back which they returned a few days later.  Thank you, BPI.  The next thing I did was find out the rate of finance charge  – 3.5%.  When I was in college, I thought that 3.5% was applied to the balance after you’ve made the payment but actually that interest charge is applied to the outstanding balance before your payment.  So if you have left even 1 cent on your balance you would be charged interest based on your previous balance.

Up till recently, I thought that was all there is to it – until my booboo.

Here is my bill for this month:

My opening balance is P31533.65  Good thing I made a partial payment otherwise I would have paid late charges too.  Based on the bill, the finance charge is P2132.13.  So I thought, hmm 3.5% of P31533.65 should be much less than that.  To be exact, it should be only P1103.68.  So I called HSBC (yeah, it’s an overseas call with overseas charges) to find out what’s up.

According to the agent I talked to.  The formula is much more complicated.  I didn’t quite catch the formula but I vaguely remember it’s a function of the average balance per month, number of days in the billing cycle etc.  Well whatever it was it amounted to P2132.13 – or 6.76%!  That’s 81.12% a year!  And that is not detailed anywhere in the bill.  So if I hadn’t noticed, and hadn’t asked, I would’ve no idea.  I did ask the agent for the formula and she told she was going to fax it to me.  But I called up our house and they didn’t get any fax from HSBC.

So if you’re still leaving a balance on your credit card bill, you better think twice.  The finance charges can be pretty exorbitant.

Is it even legal?  Isn’t this protected by a consumer law or something?