What To Do When Citibank Charges You Interest On A Zero Balance

A Consumerist reader was surprised to find that Citibank had applied a finance charge on a zero balance account. She did what every good Consumerist should do: prepared her evidence, jumped quickly ahead to a live person on the Customer Service side, and resolved the issue. Here’s what happened:


Today, I got a nice little email reminder from my bank that I had a new bill from Citicard! This was very surprising to me, as I had just paid off my balance last month. So, I log in to my online bill pay and sure enough, there is a new bill from Citicard for $12.39! Hmmm…. I wondered what that could be for, as I had cut up my card months ago, and I knew I had just paid off the balance. So, naturally, I logged into my online account with Citicard and took a closer look. And to my sheer amazement, I found I was indeed charged a $12.39 finance charge on my account. “Did they not get my payment!?!?”, I wondered. So I look a little closer, and pull up my latest statement, and this is what I found!

Now, even though it didn’t exactly show what my “previous” balance was at the time this statement was generated, it does show that I made two payments in that billing period. One, which was a balance transfer that I decided to make, (thanks to a lovely post about saving money with lesser- or no-interest balance transfer cards that I saw a couple weeks back on Consumerist.com), and a smaller payment that was the difference in the balance on the card and the amount of the balance transfer payment. I also check the statement from the previous billing period, just to make sure that I had paid the correct amount.

The two amounts matched up, so I quickly snatched up the phone. I called up Citicard, and just held on the line without entering my account number or anything, ( I learned several calls ago, not to enter in my account number and I will eventually get a real person on the line,) and told the customer service lady what my problem was. She was very courteous and even though I had to be put on hold for about 3 minutes, she was able to see the error on Citicard’s part and take off the finance charge with no hassle whatsoever.

Being an avid reader of Consumerist.com, I just felt it was worth the time to share this story with the rest of your readers, and to remind them to be vigilant in paying attention to all those little things. Had I not paid close attention to my accounts, I might just have sent another payment in. Thank you Consumerist.com!

Thalen’s Mom

(Photo: TheTruthAboutMortgage.com)


Edit Your Comment

  1. giantnegro says:

    You only noticed this error since the charge should have been zero; I wonder how many times they miscalculate the finance charge and nobody ever notices.

  2. Nick1693 says:

    I know this probably goes against something in the Comments code, but shouldnt citibank be shitibank?

  3. stang says:

    Sorry, but I blame the OP. She does not know how Credit cards work. Interest accrues DAILY on CC accounts, not just at the 30 day mark. If you charged something and left it on your card for the 30 days and paid it off you STILL OWE the interest on the charges.

  4. DoubleEcho says:

    Thalen’s Mom’s got it goin’ on!

    On saving money, that is. :)

  5. @giantnegro: My thoughts exactly. Scary.

  6. 67alecto says:

    That’s called a retail residual finance charge, and unfortunately, it’s in your card member agreement. The good news, though, is that many banks are moving away from it.

  7. fringtw1 says:

    Not trying to defend the bank here, but…if you’re carrying a balance each month and then try to just send in the total amount on the bill you receive, you will still have some extra finance charges acruing that will need to be paid. Since finance charges acrue on a daily basis when you are carrying a balance, in order to effectively pay the entire amount needed, you need to call for a payoff balance. They will calculate what your balance will be with the extra couple of days of finance charges that will acrue between the statement date and the date they expect to receive your payment. The statement is just a snapshot of your account and what you owe on that specific date, unless you are paying your balance off in full each month and are entitled to the grace period the bank offers.

  8. innout3x3 says:

    @Nick1693: I concur.

  9. mavrick67 says:

    If a portion of that balance was for a cash advance or balance transfer, you’d be subject to daily interest charges. I think that is the reason for the difference here

  10. gorckat says:

    Average Daily Balance.

    Up until the date the balance was paid off, you were accruing interest. Don’t you think the people nice enough to loan you that money deserve to be paid for doing so?

  11. anatak says:

    @giantnegro: likely more often than folks would care to admit.

    anyways, good to know that snakes still bite

  12. bobpence says:

    @67alecto: Thanks for giving it a name. Every statement I have says what balance the interest is charged on, and I imagine this one does too; it is usually the average daily balance, not the balance at the end of the period as the OP implicitly expected.

    As an example, if her rate had been 15% and she’d paid a $2700 balance 12 days into a 30-day billing cycle, the applicable finance charge would be (approximately) 12/30 x $2700 x 1/12 x 0.15 = $13.50. The first two terms are the average daily balance, which of course is usually much more complex in months with multiple credits and debits.

    The OP did nothing wrong, and neither did Citibank in this instance. She asked for a favor and they granted it. Otherwise, if they had a 50-cent minimum finance charge and she always paid the exact balance a few days after closing, she would after paying the $12.39 owe them 50 cents every month forever! They likely have an automated rule for dealing with accounts whose balance is the minimum finance charge, however.

  13. tedyc03 says:

    @gorckat: You’re actually right. Most CC companies charge you interest up to the date the balance is paid in full. So if for fifteen days you have a $100 balance they’ll charge you interest for those 15 days.

  14. mariospants says:

    I surmised the same: that this was interest on the outstanding amount up until it was paid off… but Citibank agreed it was an “error” and dropped the charge??? Wow, this CSR better hope her call doesn’t get reviewed, they legitimately were owed this money!

  15. Scuba Steve says:

    While I agree with most of the posters here, I’d still call back and make sure you don’t still have the charge.

  16. hellinmyeyes says:

    Too bad she doesn’t read her statements or disclosures. It’s an “average daily balance” for which interest is charged, not the statement balance. It’s legit. I paid my CapitalOne off last month, but because it’s been a long-standing balance (and therefore, no grace period applies), I still have to pay them another $6 this month in interest (which will get the grace period, since it’s a new charge). Sorry.

  17. hellinmyeyes says:


    Grace period covers finance charges as well. She wouldn’t owe the $0.50 perpetually.

  18. jaydez says:

    Everyone is right. But from my experience, most companies (except Capital One) are willing to waive the final finance charge if you have been a customer for a while and made them some money. Ive had BofA, Citi, Associates, and Chase all do this for me. Capital One bassicly told me to take a hike over $2. I canceled that card that day.

  19. jaydez says:

    @Nick1693: oh, and no, they shouldn’t.

  20. Hongfiately says:

    I’ve had this happen a couple of times and have never had the charge stick. What made me suspicious was that I didn’t have to fight one bit to have it removed… “Oh yes sir, we’ll remove that for you right away.” It sure made me wonder if this happens with regularity and they bank all of the payments from people who just pay it without thinking about it. Nahhh…

  21. tz says:

    This happened to me over a year ago.

    Something is wrong in Citi’s computers so it can’t add (I pay it off every month, but sometimes split, pay the minimum a day or two after the statement, then the balance just before the due date).

    Even if both payments add up to the full payment, and it isn’t a case of “double cycle billing” something goes wrong (and they may not be correcting it to collect extra $ from those who don’t notice or their math skills are poorer than Citi’s).

  22. 310Drew says:

    unless you pay off a card on the date of the statement, the “new statement balance” or whatever your particular bank calls it, it is not actually the payoff balance for any future date.

  23. IAmMarchHare says:

    I had this happen when I went to pay off Bank of America. The first month afterwards, they charged me a nominal amount, which I promptly paid. No big deal, as I realized it was the interest on the account up to when I paid it off.

    However, they turned around the NEXT MONTH and charged me AGAIN, at which point I called them up promptly. I was expecting a fight at that point, but they admitted it was a mistake and took it off. It does make you wonder, though …

  24. dveight says:

    I would like to state something regarding this that may clarify what might have happened here.

    When people sign up for these 0% interest 6-month, 12-month, etc.. promos, many times the 0% ends on a certain day. That certain day and the due date on your final bill will rarely ever be on the same day, therefore, if that was the case of this bill, Citibank may not have done anything wrong.

    Just as bobpence and hellinmyeyes mentioned, if the 0% ended on the 1st of the month, but the payment was not due to, lets say the 15th, and the OP paid on the 10th, then the OP would have been charge for interest from the 1st thought the 10th since this was a long-standing balance and would not have qualified for the grace period.

    It’s nice to see that Citibank took care of this issue for the OP, since they were most likely entitled to that amount. On a side note, I’ve never had any issues entering in my CC number on the phone to Citi and getting a live operator (if I recall, they even give you an option to speak with a live operator) so holding without entering in your CC number may actually prolong the wait.

  25. AgentTuttle says:

    The IRS tried to charge me interest on zero dollars once for a total of $1.66. One of the options they gave me was to schedule a hearing, so I did. WOW, they made that go away fast. Could you imagine a tax hearing for less than two bucks that they got after multiplying (y) by zero?

  26. deadspork says:

    Everyone is right about the Residual Finance charges. Another thing to note is that even if you pay your full balance every month, if you split your payments up you still may accrue finance charges if the final payment is posted after the actual due date.
    For example, let’s say you owe $500 on the 28th. You pay $250 on the 25th, and the other $250 on the 1st of the next month. Your statement will show that you did pay the full balance, but the entirety of that balance was not paid until AFTER the due date, causing you to accrue finance charges. Basically, it will show that for that due date you only paid $250 of the $500 due.

    It might sound ridiculous to even be saying this, but the simplest way to handle a CC is to just wait until you get your statement, then pay what’s due. Don’t split payments, and for the love of god don’t try to pay early (such as, I’m paying for next month this month, it’s two payments so it’ll count forward, RIGHT?) – credit cards don’t work like that.

  27. SayAhh says:

    *Interest is computed daily.

    *Grace period does not extend to calculation of said interest.

    *Interest on the aforementioned interest is also being accrued until you pay off the balance and the interest on that balance. Do not wait until the end of the month/grace period.

    *Charges =/= ATM withdrawals (i.e., cash advances), and may incur different interest charges/calculations

    *Closing the account does not stop interest from accruing, nor will it stop it from being reopened when you set up auto-payment with a merchant and they start or resume–legally or otherwise–charging your account.

    *Disclaimer: I’m not a banker, just a Consumerist consumer.

    *Citibank cards aren’t that great. Get an American Express card (Blue Cash or Costco-branded), but remember that paying only the amount quoted on the statement doesn’t mean you don’t still owe money, especially when you’ve carried a balance.

    *As Jerry Springer says, “take care of yourself,” and your credit card bills! LOL

  28. Coelacanth says:

    @bobpence: In Capital One’s case, that rule basically is that if you pay your balance in full for two consecutive months, then they’ll stop charging interest.

  29. azmoviez says:

    This EXACT thing happened to me with Citibank. I called to remove a finance charge because I pay off the balance monthly. It is all fixed now, but I just wonder how many months I was paying extra finance charges. This has to be a scam of some sort.

  30. @azmoviez: Have you checked your past activity? I think you can get up to 2 years of your history online. After that, you have to request a pdf statement, which is delivered online and takes about a day.

  31. Japheaux says:

    I really have no idea who this happened, but I carries a nickel balance on my Wells Fargo credit card this month. Normally I transfer directly from checking to the CC if I make a purchase, and for some reason I screwed up and left a nickel balance on the card.

    When the billing cycle came, they just adjusted it to $0.0! No fee, no penalty, no explanation….Wells fargo gave me a nickel. In these days of screw-the-customer, I am shocked to see this happen. Not that I couldn’t transfer an additional nickel, but I never heard of this before. Can anyone explain this? I wonder how high of a balance one can keep and get them to absorb it….a quarter, a buck?

  32. thalensmom says:

    OP here… loving the comments. I figure a 50/50mix on whether I deserved that or not. I didn’t bother reading over my card agreement or anything when I noticed the charge… I just figured that since I’d paid it off… finally!… that I shouldn’t be charged a finance charge. But now that I think about it… average daily balance and whatnot… I probably did. But they were super cool about waiving the charge, and that’s why I wrote in. In this world of Big Business… I should know… I work for one of ’em… It’s nice to see that not all of us are hit with bad service. That is, not all of the time. I did just experience a 52 minute wait on hold with Walmart while they tried to find someone to look to see if they had a popular children’s book in stock, and then got hung up on by the guy who finally picked up the line. I went to Borders instead with a 25% off coupon. Cheers!

  33. Schmack says:

    Next time you owe your CC company a small balance, like $3.00 or so, overpay just slightly so you have a negative balance. Don’t let them charge you back the difference to get to $0.00, as some companies do at a certain threshold – insist that your money is your money and you’d like your few cents back. This will make them invest time and resources into printing and mailing you a check for less than the expense to mail it.

    Here’s the trick: Don’t cash the check. Let it sit in a drawer or frame it to hang proudly over your desk. In a few months the CC company will send a follow-up letter saying you have a check of theirs and if you don’t cash it soon they’ll put a stop-payment on it unless you call to tell them otherwise. Let them put a stop-payment on it THEN call to get it either re-issued or unfrozen. This can go on for a long time, each time costing the company far more than the $3.00 balance they weren’t willing to forgive.

    On the other hand, you could just call the CC company first and ask them to waive the final interest payment and nip this nonsense in the bud. If they insist on payment, have no mercy on them. It also gives you ammo in the argument to get your tiny overpayment back: If they insist on getting paid, it’s only fair that they expect to pay you in turn.

  34. springboks says:

    Sneaky aren’t they. Citi also pushes their customers not to get paper statements in the mail, using the “Save the trees” argument. Very noble of them, but they’d rather save money on postage for themselves, and it gives consumers less of a chance to spot issues like the above.

    A couple bucks here and there, and citi can sweep their mortgage meltdown under the rug.

  35. deadspork says:

    @Schmack: Yes, that’s a great idea. I bet the CC customer service reps just adore it when you call in, you must be a bucket of sunshine (with a bucket of free time).

  36. urban_ninjya says:

    @Nick1693: We asians do it all the time. I guess having problems pronouncing a soft ‘C’ sound is a good excuse.

  37. meadandale says:

    This is a non-story. Your ‘current balance’ is never the whole story with a credit card. If you want to pay your card off in full, you need to call the company and get the ‘payoff amount’ which includes any accrued interest that is not reflected in your ‘current balance’ on your last bill. In fact, it’s this way with almost any debt you have including your car loan and your mortgage.

    This seems to me to be credit 101. I’ve known this for the last 20 years I’ve had a credit card.

  38. jaewon223 says:

    This happened to me!!! I paid off my balance and it showed a $0.00 balance. Later I found out somehow the Citicard I cancelled after paying off the balance had a ~$3 charge. I never found out until much much later.

    I just assumed it was a mistake but I never contacted them about it. Perhaps I should

  39. Ajh says:

    @meadandale: You speak great truths. So says the person that used to sell credit cards before she could use them. Always call your bank for the payout amount. Also, while you have them on the phone, ask them when that payment must arrive. They’d much rather give this information to you than have to deal with you angry or confused because of the interest.

    Go Citibank for helping out this person though.

  40. Robert_SF says:


    You said: Up until the date the balance was paid off, you were accruing interest. Don’t you think the people nice enough to loan you that money deserve to be paid for doing so?

    I don’t know how to concisely and accurately explain my reaction to that statement.

    The bank is being paid for the “loan” to me….whether they charge *me* interest on it or not, the *vendor* pays a percentage to credit card company for letting me use the card. On every transaction they get that. That’s my understanding. So, charging me interest is *not* the only way they make money, or are “paid” for loaning me money.

    Granted, I understand that the credit card company and I had an agreement, where I would pay the fees as described in the agreement (interest calculated as per the daily/monthly/whatever blah blah blah). I expect everyone to honor that agreement. I just hope they were practicing due diligence in understanding the agreement.

    The tone of that message, while hard to interpret in writing, of that post seems to be somewhat … condescending towards the consumer as though they wanted to get something and make sure the credit card company got nothing…which is different than the consumer just wanting to get something free (the loan) and let the credit card company make their money some other way. That’s human nature.

    Maybe I am overreacting, but consumers need to keep in mind that it’s a more complicated financial arrangement in the business world than it first appears. And that can mean good things and bad things for the consumer. On the one hand, we might get an interest free loan to buy goods, but we pay a little more for them in the end since the vendor has to base the price of the goods taking into account all the costs, which would include credit card processing fees.

  41. eliblack says:

    I disagree. Kids should get a credit card as early as possible to start building credit. And they should have a check card even earlier than that.

    I grew up in a rural town, and was always buying computer equipment (I worked hard, and a lot) – I’d have to get adults I knew to let me use their card to order stuff online, then give them cash. It was annoying, and I got a check card as soon as I could.