New credit card rule backfires for Macy's customer

April 16, 2010 7:13:53 PM PDT
The new credit card laws designed to protect consumers actually caused a big headache for one customer. She was trying to do the right thing by paying down her bills, and it nearly ended up costing her more.

Credit card laws do guard against many of the old abuses, but one well-intentioned new rule actually backfired on a credit card customer and nearly cost her hundreds of dollars.

Remy Gordon bought a lovely diamond bracelet with her Macy's charge card. It came with a special incentive -- she had two years to pay it off at 0 percent interest.

"I was just shopping around looking around and then it just caught my eye. I said hmmm, that's a beautiful bracelet," she said.

However, the deal came with a condition. Pay off the entire balance by August 2010 or pay all of the interest that would have been due at 24 percent per year.

So she was really careful to keep up the monthly payments -- until one day, the store would not let her.

"They said, 'Oh no, you can't do that anymore.' [I said] 'What do you mean I can't do that anymore? I just paid last month.' They said, 'Oh, there's a new law.'"

The last thing she expected was to get tripped up by the new credit card law which is supposed to protect consumers from credit card abuses.

"It's not protecting me," she said.

What happened was that Macy's took her bracelet payments but did not use them for the bracelet. Instead, her payments were applied to her regular Macy's charge card. Why? The new law says banks must pay off your highest interest balance first. Gordon's Macy's card is costing her 25 percent interest, while the bracelet is still zero. She was facing interest of about $800 on the bracelet and she could not get anybody to let her pay for it.

"If I want to pay my deferred account in full right now, what's going to happen? You can't pay," she said. "I should be able to choose which one I want to pay. If I want to pay the one that has no interest, I should be able to do that. They said no. So I got so frustrated."

Consumer credit counselor Dan Parrish says the law is aimed at helping you pay down your most expensive debt first. However, that might not always be best.

"There's going to be some glitches in the new laws and as time goes on we'll find out more information or more little hidden things that we weren't aware of when this initially came about a couple months ago," he said.

So Gordon called 7 On Your Side and we contacted Citibank, which handles Macy's accounts. Citibank said the law is clear. High interest balances get paid first.

Gordon took action. She paid off all the regular high interest charges on her Macy's card, and now her payments can go toward that bracelet, which she says she is enjoying in spite of all this.

"I've been wearing it every day for almost two years," she said. "Everybody who sees it loves it. They say, 'what a beautiful bracelet.' So, I'm happy,"

Citibank tells 7 On Your Side the law would allow the consumer to pay off the bracelet during the last three months of her two-year contract at 0 percent interest. So if you find yourself in her situation, do check out that option.


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