- Personal Finance»
- Managing Credit Cards & Payment Options
Union Plus and Capital One
Capital One Circumvents Reforms
On May 22, 2009, President Obama signed the "Credit Card Accountability, Responsibility, and Disclosure Act" which illustrates reforms to protect American credit card holders."
Well, Union Plus and Capital One evidently didn't get the message. Instead, they used every tool in their legal arsenal, to purposely mislead Union Plus credit card holders into paying exorbitant fees on their high interest bearing balances.
They have been circumventing this federal regulation since its inception, and the sum of money that they have garnered has been staggering. Capital One bought Union Plus from Hudson City Savings Bank in May 2012 for $31 billion, and they are evidently trying to get their money back by taking advantage of unsuspecting Union Plus credit card holders.
Here is what Union Plus's Credit Card Holder Agreement states:
How we apply payments:
We apply your payment up to and including the Minimum Payment Due as we determine, and usually to lower APR
balances before higher ones.
Any payment amount greater than the Minimum Payment Due is applied to higher APR balances before lower ones.
I already have a problem with this agreement. The minimum payment is 2.5% of the outstanding balance (charged items and cash advances combined). If you have a $10,000 balance, then your minimum payment is $250. This agreement plainly states that this $250 can be applied to whichever balance they choose and "usually to lower APR balances before higher ones." Well, I've had their card for many years, and they have never applied any part of the minimum payment to higher interest bearing balances. I doubt that they are doing this just for me. I wouldn't be surprised if they raised the minimum payment to 5%, allocated it to the lower interest balances, and kept the entire cash advance balance on the books.
The whole thing just irks me to no end. It's not the money, but the sheer disregard of a policy that was instituted to help people with high credit card balances. Union Plus and Capital One obviously do not care about the average person's credit card balance, and care more about their own bottom line. If every credit card company worked the way Union Plus worked, then the U.S. economy would in worse shape than it is already.
The following is stated on every Union Plus Credit Card Statement:
How Interest Charges Are Calculated: To determine your periodic Interest Charges on each billing statement, we: determine the Average Daily Balance for each type of transaction; (for example, purchases, balance transfers, and cash advances); then multiply this number by the applicable Daily Periodic Rate; then multiply this number by the total number of days in the billing cycle. We use the applicable Daily Periodic Rate in effect on the billing statement closing date. You can determine your Daily Periodic Rate by dividing the APR by 365. How Daily Balance Is determined: We take the beginning balance for each type of transaction that day; then add the following: any new transactions; any previous day’s periodic Interest charges; any Finance Charges; any fees and charges, including any credit insurance premiums or debt cancellation fees, if these apply. We then subtract any payments and/or credits.
This is written in the spirit of the "Truth in Lending Act" reforms of 2009. However, what Capital One fails to disclose, is the day that they apply these payments. The law states that every banking institution can apply payments to balances on any day of the present or previous billing cycle. Capital One chose to use the very last day of the preceding month's billing period, when determining credit card balances. Within the scope of the law, this is the worst scenario for the consumer, but when Capital One explains in great detail how they apply payments (as above), yet chooses to leave out that the balances are determined on the last day of the previous billing cycle, it smacks of inconsistency and deception.
I'll illustrate the nature of this abuse: Suppose, that your billing cycle is the first day of the month through the last day of the month. You charged $1000 on your credit card on March 15, and then did a cash advance on April 2 for $1000. You receive your March credit card bill on April 6, and you only have $1000 to put towards your bill. The spirit of the reform is to make sure that $1000 is allocated towards the cash advance, since you're paying 24% on that balance and 13% on the charged balance. Capital One will allocate that $1000 to the charged items, keep your $1000 cash advance balance on the books, and collect an additional month of interest ($20 in this example), until you receive April's bill (on May 6), and send them the $1000 for the cash advance.
If you can understand the above examples, it should be crystal clear that Capital One is raking it in at the expense of Union Plus credit card holders. The spirit of the federal reform and the language of Union Plus's Credit Card Holder Agreement say that payments will be allocated to the highest interest bearing balance. When Capital One receives that $1000 payment in mid-April, they are aware of the cash advance done on April 2, yet they allocate the payment to the charged balance, taking refuge behind a supplement in the reform that lets them choose which day the balances are determined. I would be less upset, if Capital One added, "Balances are determined on the last day of the prior billing cycle" on the Credit Card Holder Agreement. But they do not disclose that information because they are not legally obligated to. In my humble opinion, that is misleading.
There are close to three million Union Plus credit card holders. How many of them do you think notice the omission? The "Truth in Lending" reform was created to protect credit card holders who use cash advances or have deferred interest loans. Capital One uses legal loopholes in the reform to take advantage of these same people. How much money do you think Capital One makes by not disclosing this information? Union Plus credit card holders will lose money, due to Capital One's circumvention of the reform and lack of moral fiber. If Union Plus credit card holders were to switch to a credit card that is not backed by Capital One, they would most likely save money. When I discovered this deceptive language, I immediately cancelled my Union Plus card and switched to another credit card company. I do not know how to get my point across more clearly than that. I know that we all abhor switching phone companies, cable companies, internet companies, etc., but switching credit card companies from Union Plus to almost any other company, would be worth the hassle. I promise.
An issue that also befuddles me, is that Union Plus offers no method for their clients to expedite the payment of their credit balances. This might sound confusing, so I'll explain by using an example: I share my account with close family members, some whom live in states other than my own. One day, I intended to put gas in my car, only to find that my Union Plus Capital One credit card was declined. It turned out that, unbeknownst to me, a healthy expenditure had been charged to the card, thus, exhausting the limit. No problem...These things happen. So, I paid with cash.
A couple of hours later, a relative called to tell me that her credit card was being declined. Of course, because we shared the same account. However, this particular family member relied on her credit card for everything. She had no other means by which to pay for anything. Okay...Still no problem. Banks were still open, so I could call Union Plus, and make a payment by phone. They would have my routing and account numbers, and they would transfer whatever funds necessary. Problem solved.
The next day, my family called again, and said that there was still no credit available. I called Union Plus to find out what happened. As it turns out, they were holding my phone payment for 4 - 6 days, the time involved to clear a check. I explained that I did not pay with a conventional check, and that the reason I phoned them, and gave them all of my banking information, was to expedite the process of freeing up credit, so that my family could have available means.
Union Plus said that they had to clear all payments, which basically means that, if you have an emergency, and you give Union Plus access to your bank account, and have them withdraw the amount that you want to pay toward your credit balance, then it will take 4 - 6 days before Union Plus can do anything helpful. I hope that this article will help Union Plus credit card holders make an informed decision about which credit card companies hold their best interests.