About two months ago, I bought a washer and dryer from Home Depot for $1455 and paid with my Home Depot credit card. After about 5 years of using the card, I had grown accustomed to No Payments, No Interest for 6 months. This is how the plan would go: I pay $100, then maybe $500 in a couple of months; then maybe another $500 and then the remaining ~$350 before the promotional period is over and the accrued interest is due. I've worked this racket over and again, never having to pay any interest and paying off close to $10k in principle without a hitch. According to Home Depot, the CARD consumer protection act has ruined this agreement. Monthly payments now must be made: of 1% of your balance.
I paid $100 in the first week. Unbeknownst to me, this $100 went against ~$14 that I owed that month. Then, I had to make another ~$14 payment the next month. I wondered about this minimum payment; so, I went into Home Depot to see what it was about. They explained that, because of the new "consumer protection" laws, a minimum payment was now due every month, regardless of what had already been paid. I was being charged a $35 late fee because I was 6 days late on my second payment of $14.
So, if I paid $1454 of the original $1455 principle the day I left the store, I would have a $1 balance with a minimum payment of $.01. If I was 6 days late on this $.01, I would be charged a $35 late fee. I have a degree in math, but I'm no mathematician or accountant. I think that $35 on $1 of principle amounts to 3500% which times 12 comes to 42000% APR. My APR calculation is probably a little off; but, you get the idea.
What about the rationale behind this provision? It's framed to help people "stay out of trouble". If a card holder put off making payments until the end of promotional period and did not have enough to pay the balance, true enough, something very bad would happen. I'm not sure what; I think that all of the accrued interest goes into the principle and ~18% interest ensues on all of it. Pretty bad if you let that happen. Now, thanks to the alleged provision, $5400 in principle would magically only be $5084 after making 1% payments every month for 6 months. So, someone might be in the position of saying, "thank goodness I only have to pay $5084, that $5400 would have broken me".
I've had a Home Depot credit card for perhaps 5 years. I have never paid a penny of interest for this card and have been quite happy with it. Now, I'm not sure if I will ever spend another dollar with Home Depot (they "couldn't" wave the $35 fee). I paid the balance in full to make sure that our current account would not incur any more perverse charges.
If the accusation made by Home Depot is true, that the CARD act forced them to ruin our credit card agreement, I must assume that the rest of the consumer protection measures are similar cockamamie bunk. I suspect that we have yet another instance of regulatory capture where the government pretends to act in the interest of consumers but is really acting in partnership with those who they are supposed to be regulating.
I fear that this is a harbinger of all the help and protection that we can expect from recent federal legislation.
