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Credit Card Grace Period Overview
Several recent lawsuits have been filed by consumers who claim that they were improperly overcharged interest when they paid their credit card balance in full. Many credit cards advertise a credit card grace period, during which the credit card company claims to not charge consumers interest if they pay their entire balance by the due date on a given month.
What is a Credit Card Grace Period?
A credit card grace period is the time between the end of your credit card’s billing cycle and the date when the payment is due. Under federal law, credit card billing statements must be made available to consumers no later than 21 days before the due date. This gives consumers three weeks to pay off their balance before being assessed interest on their purchases.
However, if consumers do not pay off the full balance by the statement’s due date, they will be in debt and will be assessed interest on the remaining balance. Additionally, many consumers may not know that when they do not fully pay off their balance and carry a debt, their credit card issuer eliminates the card’s grace period. This means that interest will be applied not only to the existing debt, but also to future purchases until you have paid off your entire balance.
For some credit card companies, consumers must pay their balance in full for multiple, consecutive billing cycles in order to regain their interest grace period on their card. Others, however, may continue to charge residual interest.
Credit Card Grace Period Lawsuits
According to several customer reports, many credit card companies have grace period policies that are misleading or confusing.
One Capital One customer who filed a Capital One credit card interest lawsuit reported that the company’s policy states that consumers will not be charged interest on new transactions if the total balance of the account is paid in full by the due date each month. However, she claims that the company applies interest charges in ways that may violate their own policies. Allegedly, if a consumer pays $99 out of a $100 balance, interest will not only be applied to the remaining $1, but also to all future purchases.
Lawsuits against credit card companies regarding their grace period policies claim that these companies may be breaching consumer contracts, breaching the covenant of good faith and fair dealing, and violating consumer protection laws.
Who May Be Affected?
Several financial institutions are being investigated for possible inappropriate credit card interest charges. You may have been subject to these deceptive practices if you are a credit card holder at any of the following institutions:
- Ally
- Bank of America
- Capital One
- Chase
- HSBC
- TD Bank
If you are the holder of a credit card and believe you have been assessed inappropriate interest fees on debts that were paid off before the due date, you may qualify to hire a financial attorney and join a credit card grace period class action lawsuit. Plaintiffs in these lawsuits may be able to recoup compensation including restitution, actual or punitive damages, pre-judgement interest, court fees, and attorney costs.
