Changed Billing Cycle Can Spell Trouble

In personal finance dealings, a sudden change can catch you unaware. For example, one day you may find that the due date on your credit card has changed and you are actually late on the payment. Take the following case:

Rita's credit card statement would be generated on the 15th of the month and the payment would have to be made by the 6th of the next month. This time around she made the payment in the same cycle but was shocked to find that in the next statement she was charged Rs 350 as a late payment fee plus Rs 450 as interest. Wondering as to how there had been a delay she called up the bank, trying to find out the reason for the charges and asking for a reversal.

What exactly happened in case of Rita?
A credit card payment has to be done by the due date specified on the credit card statement so that there are no late charges and no levying of interest. This is the certain time period from the generation of the statement to the payment date in which a card holder can use the credit allocated to him/her for free. This is specified for each bank, generally 15 or 20 days as per the conditions laid out in the credit card agreement.

However, there is a danger that at some point of time the bank may suddenly change the cycle for the payment. This happened in case of Rita; her bank changed the time period for the credit card by a period of 7 days. This means that the 21-day period came down to 14 days, reducing the time available for making the payment.

What could be the reason for this sudden change?
This usually happens when a bank wants to reduce or increase the credit period that is allowed to a card holder. In most cases, it is usually the former as the funds of the bank are utilised by its customers for less time period.

Did Rita receive any intimation from the bank?
A bank has to inform a credit card holder about the change in the payment date and the cycle. The exact manner of the intimation will be specified in the code of conduct of the bank and every credit card holder has to check out the details in this regard. In some cases even though there might not be a clear mention about the reduction in the time period, the change in the due date is intimated in some way or the other. In many cases, the bank just change the payment date after first changing the conditions related to the credit card and individuals do not make the connection between the two.

Rita's last card statement contained details about the conditions for the card where the change was made, i.e., her 21-day interest-free grace period was reduced to 14 days. But she ignored that and did not even look at the latest statement for the exact payment date.

Can she avoid the late payment fees and interest charges?

The bank's contention is that the change in the date was informed through the changed conditions and then again through the credit card statement. But Rita still can complain to the bank and ask it to consider the situation because of the oversight and the fact that the change was ignored because that was not known. Depending upon the nature of relationship of Rita with the bank the charges could be rolled back but if it insists that adequate procedure was followed as per the rules then the charges would have to be paid.