Finance charges accrue daily through the date the payment in full is received, which is why the OP got finance charges.

Example: Your statement closes on the 15th of May and a new statement is mailed the next day. Your due date for the statement is June 10. You pay the balance in full from that statement on June 2. When your next statement cycles June 15, you are billed finance charges because you carried the balance from May 16-June 2, when you paid it in full. So when your statement prints on June 15, your interest is computed for the 18 days you waited to pay the balance in full.

He should now pay $140, his account will have -$10 and at the end of the month he'll get a bill for -$5 or something like that (-$10 + interest on that $130 for the number of days until it was paid).

Still sucks. I would just close the credit card completely...

@Brian Morris: So in other words, no grace period. The CSR should have been able to compute for the mark...er...customer the payoff amount for a payment sent on such and such day. Down to the penny.

I would have paid one cent less than that amount, just to see how many months they'd continue to send me statements, or if they'd send that one cent debt to a collector. The fun had would have exceeded the cost to my credit rating.

@Marius H: Closing it does nothing. Most credit card companies bill for residual finance charges. Standard practice.

Once he pays his balance in full for one month, shouldn't that reinstate the grace period (i.e. if you pay in full by the due date there are no interest charges)? If so, he won't be charged interest on the $130 and when he pays that amount by the due date he will finally have a zero balance.

I used to be a Service Desk Supervisor at The Home Depot (a long, painful period in my career ;) ), and we used to have folks come in with complaints like this all the time. Usually, I would simply call the Home Depot Credit Card customer service using the Store-Dedicated line for the customer. Once I got a human on the phone, I'd ask to have the interest removed (Insert Magic Phrase Here) as a "one-time only exception for a valued customer". The only time that never, ever worked for me was when the customer in question had the same incident happen five or six times.

Sweet talkin' customer service reps goes a loooong way sometimes!

Their credit is by far the worst. I paid off my bill on a Tuesday and than decided on Saturday to do some other home improvement. I spent wayy less than my available balance to find out they lowered my available balance and that I would receive a letter they sent out the previous day. To bad it took like two weeks for me to get the letter. Thanks a lot Home Depot you saved me a lot of money since I'll no longer be spending a dime in your store. Plus you pissed off your associates who had to put back a lot of random items in my cart. Way to go!!

@Brian Morris: But if its cancelled, the charges should stop accruing then. In theory.

It's called "average daily balance". Every card I've had works this way. The charges won't be perpetual (they won't charge interest on your interest), but they calculated his average daily balance (which would have been $4250 if he had the $8500 balance for 15 days) and based the interest on that. Pretty common, really.

What do you think his interest rate was to have $130 for one month in finance charges?

@skizsrodt: Nope-not until it's paid off.

About 20%, depending on exactly when in the cycle he paid it. It was $8500, after all.

@Brian Morris: So when the June statement comes on June 15th and you pay that 18 days worth of interest, won't you get another statement in July for the interest from June 15th thru the date you paid it? Seems like a never ending cycle to me.

I won't offer an opinion of the quality of the Home Depot credit card, but what they did is standard practice in the industry. Your interest is calculated based on the average daily balance---the balance of your account on each given day of the statement period is added up, then divided by the number of days in that billing period to come up with the ADB. For example, you have a balance of 1000.00 at the start of a billing period, and you make a purchase for 500.00 on the sixteenth day. If there are 30 days in the billing period, your ADB is (15 * 1000.00) + (15 * 1500.00) / 30 days = 1250.00. It doesn't matter if you pay your account off the first day of a billing period, there will still be an ADB---using the prior example, you pay off a 1000.00 balance the first day, then your ADP becomes (1 * 1000.00) + (29 * 0.00) / 30 = 33.33; and you would still owe interest on that amount. Once you pay the interest owed on the next statement, then you are back to a zero balance.

Hope this helps.

why apply for a home depot credit card in the first place ?!

It is called accrued interest.

1st Financial Bank does the same thing. I sent them a check to pay off my balance in full and received a bill the next billing statement for like $20-something in finance charges. Since they charge a fee (!) for making payments online, the only way I could get rid of it at last was to send a check for a couple dollars more than I owed, forcing them to send me a check for a dollar or so back.

@waza0: I did it for the 20% off your purchase offer on a large purchase, a while back.

When we paid off our Home Depot card last August, we were not billed another month of interest. We paid our new balance on the August atatement and that was it.
However, if you look on the back of your statement, there are 6 different ways that they calculate your average daily balance and the letter by your interest rate tells which one they use on you. One of which is two-cycle balance calculation. Maybe this is what he has?

@tbonekatz:
Aaarrgh! atatement=statement

@HurtsSoGood: There is a grace period. uYour "grace period" is from the date your statement is cut to the date your payment is due. Grace period is the period of time you have to delay making payment. It has ZERO to due with finance charges.

And making it a penny short is kind of assinine IMHO.

@yesteraeon: Yes, but the problem is, he revolved his debt (in other words, he let it carry from one statement to the next). THAT'S what triggers residual finance charges.

@tbonekatz: You must not havr revolved any portion of your balance.@t325: Correct. It sounds odd, but it takes two billing cycles to catch up because everything on a credit card is billed a month behind. So using my example, if they paid the interest on the June statement, they would be free and clear.

@t325:

No. The charge is written as interest in the system. I don't think it would apply interest on the interest, else the yearly interest % written on the contract would not be correct.

@t325: @t325: @t325: @skizsrodt: No. Closing an account means you are no longer requesting charging privileges. Under the terms of your card agreement payment are still due until paid in full AND finance charges accrue. You are borrowing money, afterall.. remember that.

@Brian Morris: @skizsrodt: No. Closing an account means you are no longer requesting charging privileges. Under the terms of your card agreement payment are still due until paid in full AND finance charges accrue. You are borrowing money, afterall.. remember that.

The IRS tried to do something similar to me until I called bullshit and they made it go away. Anything times zero is zero. That exchange showed me what idiots and extortionists they are.

This tactic is called "trailing interest", and is very common. What isn't so common is the claim that they "can't do anything" about it. Here's the way out: ask them for a payoff balance. They may waffle a bit and tell you that it's only valid that same day or whatever, so get the payoff balance based on whatever date you're sure your payment will be received. For example, if you're paying right then, over the phone, your payment is received immediately. Online banking payments generally post in 1-4 business days. A check (depending on where and how you're mailing it) can take longer. Estimate conservatively, and pay the payoff amount they quote based on that date. If they claim they can't tell you, talk to a supervisor. Or, figure it out yourself: the interest will be your APR divided by 365, times the number of days that elapse between your statement date and the date you're paying, multiplied again by your principal amount (your current balance).

PLEASE NOTE: This claim that interest will accrue on interest is only PARTLY correct: they can't charge you interest on interest until it becomes part of the principal. Usually, your cardholder agreement states that the interest will become part of the principal at the end of every statement. Thus, if you incur finance charges of $130 after you paid off the balance, paying off that $130 before the due date on your statement should be the last payment you make.

But even more important: the squeaky wheel gets the grease. If you pay off your balance and can honestly tell the credit card customer service rep that you requested a payoff balance and that's what they quoted you... you have grounds for them to waive the finance charges, which is one fee they have the most leeway over, anyway. If they refuse, ask for a supervisor, who often has the authority to do so. DON'T LOSE YOUR TEMPER. Upsetting a customer service rep who CAN help you but doesn't HAVE to won't do you any good. Worst-case scenario: thank them, hang up, and call back. You wouldn't believe how often this will work. Just because two out of five representatives say no doesn't mean the other three will.

Good luck!

@Brian Morris: @tbonekatz: Yeah, this sounds like double cycle interest billing.

@Brian Morris:

Perfect way of explaining it Brian. The OP still borrowed that money for X number of days, so he got billed interest every single day while the loan was still outstanding.

I agree with everyone above that this is common and not specific to Home Depot. I would suggest using their online features and look at the balance the day the statement is issued and pay that the same day. I had a similar struggle to pay off a Bank of America card and online banking was the only way to get to true zero otherwise I kept getting hit with (smaller and smaller) interest of interest payments.

@MauriceCallidice:

Same here, I got 20% off a refrigerator and "no payments and no interest for 12 months." That is the only real reason to use such a card like that. Gives you time to spread that large needed purchase over a longer period of time with no extra cost.

Ofcourse it is a wasted effort if you don't pay off the entire amount in the time period as the interest actually still accrues. I dislike them using the term "no interest" in the manner in which they use it.

Before I would let ANY credit card go that high I would contact a bank, or banks if necessary, and see about getting a loan from them. It is much cheaper if they will approve it. No credit card should have thousands of dollars on them.

@HurtsSoGood:

When I canceled my landline with AT&T, they sent me a bill for around 33 cents IIRC, I was already fully entrenched in online bill payments by then, otherwise I would have ended up paying more for the stamp to mail the bill than what was due on the bill itself.

@Coles_Law: But the OP said he paid it off...

Ugh double cycle billing. I do hope they make this illegal VERY soon.

@Brian Morris: You really need to learn how the commenting system works around here.

@rugman11: I don't know what an average daily balance is, but if I'm to take it literally wouldn't $4250 be and average balance if he had it for 2 days, not 15? Can you explain this to me?

It is NOT double billing.

Statement Cuts: New Balance-$8500

x number of days pass, grace period long passed, average daily balance.

OP pays $8500

10 days later new statement cuts and ADB was 4000 and intrest gets charged on that

IMO there's nothing wrong with this practice. The merchant is entitled to interest on the amount it loaned you until it is paid. In my experience, interest will not be charged on a balance which is interest only if it is paid off by the end of the next billing cycle.

@ShadowFalls: My previous employer had one for purchases while we were building our store. When we opened, we paid the entire thing off at once and closed it.

@Brian Morris:
Actually, part of my balance was revolving and part was interest-free promotional.

Send them 1300 ten cent checks.

I think with the new legislation coming our way (maybe... maybe not)there should be laws regarding what is on each statement. There should be a payoff amount on each statement. Nissan did this on every statement, and we paid off the car early with no worries about the amount due. This would solve the problem completely.

Chase does this. I recently paid off a Chase Mastercard, I believe the last payment was in the neighborhood of $100. The next statement I recieved had a finance charge of $1 and some change. When I called I asked them if they really expected me to send them a check for $1 and they said I could pay online, which I suggested was still rediculous and the csr offered to waive the charge. As they explained it the finance charge was from the month prior, before I paid of the balance.

I promptly closed that account.

Their "special finance" promotion sucks also. We closed our account with them after learning the way the handle their special financing promotion. After being bombarded with finance charges, I called home depot and asked why our extra payments weren't being applied to our special promotion. She told me that in order for extra payments to be applied to the promotions we had to call them first...no where could I find this on the credit card bill and all the fine print

Sorry, this is perfectly normal and legal. The terms say that if you pay it off after the first bill there is no interest. If you float a balance than even when you pay it off you will owe for the interest for that period. It should be pro-rated based on the average daily balance for the period, but you owe it. That's the way it is.

@winstonthorne: And this would solve what....? Checks aren't free, neither is postage.

The correct way to pay off a card (at least when you're going to close it and want no further interest) is to phone up and request a "Payoff" amount. They will tell you exactly how much your need to pay -- for instance your current balance + some days worth of new finance charges -- and then "lock" your balance in at that rate for 7-10 days to allow you to mail in your payment. (It depends on the card, your balance, and when in your billing cycle you're calling.)

One time I called and asked for a Payoff on a department store charge and the phone rep didn't understand and just told me my current balance. I asked him repeatedly but he just gave me my balance. So, I paid it and the bill cycled and I had $5 in interest the next month. I called back and the rep I got that time *immediately* understood the situation, quickly got manager approval and just voided the $5 interest charge and closed my account.