Top Class Actions’s website and social media posts use affiliate links. If you make a purchase using such links, we may receive a commission, but it will not result in any additional charges to you. Please review our Affiliate Link Disclosure for more information.
Residual Interest Overview
Understanding how residual interest is used by a credit card company is important for anyone who currently owns a credit card and wants to be more familiar with the fees and interest being charged. Credit card bills can be confusing.
Defining Residual Interest
Residual interest on a card refers to the interest charged when a person doesn’t pay their credit card in full by the time the grace period is up. There are a variety of elements that can impact the grace period, such as:
Billing Date
Residual interest could be charged based on your individual billing cycle. Your billing cycle refers to the time between the arrival of your bills and may be different based on your individual credit cards.
Closing Date
Another term that could be referenced with a credit card in relation to residual interest is the closing date. The closing date is the final day of the billing cycle. The closing date is distinct from the due date.
Following the closing date, any new purchases that are made by you go to the next billing cycle, even if you are currently in the middle of the calendar month at the time that the closing date has passed.
Due Date
Your due date happens somewhere within a month after the closing date and can vary since some credit cards will give you between 25 to 30 days. You can review your credit card statement to figure out exactly how much time is left in your billing cycle.
Grace Period
A grace period is the time between your closing date and your due date. You should get approximately one month to pay off your balance before interest can increase the underlying balance.
If you are not able to pay your balance in full by the conclusion of the grace period or the due date, then you will be charged interest on the remaining balance. The grace period might also be referred to as the time between your closing date and your due date.
Contesting A Charge
Make sure that you always check your statement carefully to figure out whether or not residual interest has been charged, especially if you have paid off a credit card bill. The amount that is different on your statement could include residual interest.
A class action lawsuit was even started against Capital One alleging such interest fee practices are unfair.
Make sure that any pay off amount you are told by a company representative is correct – the total on your bill is almost never the final payoff amount. You can contest a charge if the person gave you the wrong amount and you were charged residual interest as a result.
Trailing Interest
Trailing interest is another term for residual interest, which simply refers to the interest charged on a credit card balance between your billing statement due date and the date that you pay the bill. Residual interest or trailing interest only applies to your account if you carry a balance on your credit card from one month to another.
If you have more than one credit card, as many consumers do, it pays to manage the balances on all of them carefully.
Residual Interest Disclosures
Unfortunately, disclosures surrounding the practice of charging residual interest have not been standardized and are frequently not explained in a simple to understand way, according to consumer advocates. This means that many people receive a bill that has residual interest fees added on to it, but the person cannot figure out where that fee came from and why they owe any money at all. Many individuals try to manage fees by paying off their card monthly, and unexpected fees are not planned for.
This can make it especially confusing for a credit card customer who might have been told they had a certain amount to pay off to bring the balance down to zero and then later discover that this was inaccurate. If this applies to you, a consumer protection lawyer could be able to help.
