CitiBank (to ryme with Scum)

I have had my belief that the banking system in the United States is just plain villainous re-affirmed today.  I went to pay CitiBank down to zero (first time in like 3 years) and discovered what “average daily balance” meant.  I had always assumed that interest was calculated based on your balance on the cyclic closing date (which to me seems fair).  Of course, 3 years ago I paid my bill off every month.

So back to the present: I go to pay my bill and I look at the amount of interest accrued since my last payment and it’s 3X as high as I figure it should be.  Why?  Because the interest is not calculated on the balance left after your payment, but rather it is based on the “”average daily balance”.  Meaning, if you wait until your due date to pay your balance, you are being charged interest on an amount very near your full outstanding balance at the end of your last statement.  Lesson: If you cannot pay off your full bill, at least try and pay as close to the statement date as possible 😛

The real question I have is this, though: Why are credit card companies allowed to do this?  It seems to me this should be illegal.  Charging interest on interest just reeks criminal.

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