With credit cards, beware 'balance payoff' trap -- Page 2

"It could be in an annual notice, with a change in terms. It could be in small print on the back of a statement or a supplement to a statement."

Sometimes, a change that explains how your interest rate is being calculated can get lost in piles of mail.

"With the volume of mail our students receive, we warn them about the dangers of identity theft, and we also advise them about knowing the billing cycle. Some are just not reading their mail."

Try protesting
If you are assessed interest after you pay off a balance, Bagwell suggests calling the issuer to see if it can possibly be lifted.

"In my experience, it's case-by-case," she says. "Every time there's an unexpected fee, I encourage the consumer to call and ask why it was incurred, and see if it can be removed."

The payoff balance confusion is a problem that can get bigger if it recurs. The larger problem, Bagwell says, is not understanding the entire billing-cycle concept, including the payment due date -- and the time-of-day clause.

"Not only does a payment have to be received by Feb. 5, but it's noon on Feb. 5, so there's a time responsibility."

You might think paying online will cure that, but not necessarily.

Online payoff balances
If you pay online, you still have to be careful, the issuer's representative says, to get the exact amount you owe. A quick check of a few credit-card sites revealed that the online "payoff balance" isn't totally correct, either. You still have to make the call and ask for a calculation to get your up-to-the-minute balance.

Then there's the time lag, again.

"It's a one-to-three-day lag sometimes," O'Toole explains. "So it's a partial solution, since some will charge to process that for you. Some charge nothing, and some charge $10. They charge what they think they can obtain without insulting their customers."

So the terms matter online, too, even if it requires five clicks to get to that relevant clause.

Consider a local bank
O'Toole of Credit Counseling Services says a local bank or credit union may be a better bet.

"Most of us have national credit cards because of the ad budget," he says. "The local bank or credit union down the street doesn't have the budget."

But the local bank "doesn't just want your credit card, they want your checking account and your car loan. So if you want to reverse a late fee, you'll have a lot more pull face to face than if you call someone in New Jersey."

It may also be best to have the option of paying in person if you tend to pay at the last minute, or if you keep getting hit with residual interest charges.

Other traps
Sometimes, it's not just residual interest that's making it hard to pay your balance down to zero, even when you think you're writing a check for the full amount.

Karen Gross, professor of law at New York Law School and a specialist in consumer debt issues, sometimes sees "what is known as a double billing cycle. In other words, the cycle is 60 days, not 30 days. Credit card companies are doing this to, in essence, penalize those that repay and to garner greater interest over a greater period.

"So, if the cycle is 60 days and you pay in 30, it does not matter -- the pay period is 60 days so the interest will run for 60 days."

She also sees grace period snipping, which can explain why you're still stuck with interest after you thought you paid things off.

"Another recent trend is to curtail grace periods so, if this is so, the interest can run from the POP, or point of purchase, rather than giving 20 to 30 days for payment in full."

It's all part of the profit game.

"Credit card companies are changing the terms of credit agreements to increase their ability to collect interest," Gross says. "That is why it is critical to read credit card agreements and particularly the changes to the agreement that are sent, appear in small print and alter the original arrangement between the cardholder and the credit card issuer."

The bottom line is that it's all legal if they tell you. And the last thing those tiny letters want to do is make it easy for you to pay it all off.

Your best defense, according to both issuers and personal-finance experts, is to read very carefully -- and call with pointed questions -- to make sure zero really means zero.