Credit card holder beware

Okay, I confess that when I first saw the headline for this article in the Toronto Star, my first thought was, "Yes, more fees, but I usually pay my bill in time and in full." Boy, am I glad I read it anyway. Here's a quote to entice you to read the whole article:

Alan Pyle normally pays his credit card balance in full before the due date. But when he went on a business trip, he forgot to prepay his BMO Mosaik MasterCard bill.

He paid in full when he returned, six days after the due date. For two months afterward, he paid in full before the due date – but kept seeing interest charged on his new purchases.

"The explanation I received was that the bank continues to charge interest until two statements have been paid on time, not just one," he says ...

Suppose you make a partial or late payment in April. This means you will get an interest-free period on new purchases only in July – assuming you pay in full in both June and July.

With the old method, no interest would be charged on new purchases made in May, as long as you paid your balance by the June due date.

Companies using the old method include Canadian Tire, Citizens Bank, HSBC Bank, JP Morgan Chase Bank, Laurentian Bank, National Bank, Scotiabank and TD Canada Trust.

Others using the new method include Amex Bank, Citibank, MBNA Canada and Wells Fargo Financial Corp.

You can find out which method your card issuer uses by checking the Financial Consumer Agency of Canada's updated credit card comparisons at

Pyle has some cautionary advice for cardholders.

"If you have an unpaid balance for one month, take that credit card and put it in a drawer," he says. "Don't use it until you've had the chance to pay the next two statements on time. Use cash or another credit card. That way, you avoid interest charges on further purchases."

If you overpay and have a positive balance on your credit card for more than a year, you could get hit with an administration fee.

That's what happened to Janet Moore, who had a credit balance on her Sears MasterCard since December 2005. In January of this year, she found a $25 fee deducted from her $31.52 balance, bringing it down to $6.52.

WOW. This is unreal. I am going to watch my statements like a hawk from now on!