Is This Legal?

[ThisVNchick]

I made a big purchase in July at Neiman Marcus. I qualified for the 12-month no interest promotion so I ended up agreeing to put the purchase on promotion.

Jump to December, I ended up with bunch of gift cards at Neiman Marcus from a recent birthday. I went in and got a gift for my mom. She didn't like so I returned it. When the sales associate returned the purchase, she said it credited everything back to card (no re-issuing of GCs). I told her that's fine, since I had a balance on my card anyways and didn't mind having the credit pay some of it off.

January rolls around and my statement comes in the mail. It made no sense. The interest-saver payments (the equal payments I was suppose to make in order to keep my promotional balance in good standing/not accrue interest) were 4 times what I was paying before. So I called customer service. It took 8 agents "looking into my case" before someone could explain what happened. From what I was told, when I did the return, the credit did go back to the card, but instead of first crediting the purchase amount and then using the difference (what the GCs were worth) to credit my current promotional balance, the used the whole credit and deducted it from my promotional balance. So now, I am left paying for items I no longer own! I've gone back and read the fine print and nowhere does it say when you make a return, that the return credits your older purchases first and not for the actual purchase you're attempting to return.

Needless to say, I will be paying off this entire balance in whole and closing my NM card. I am thankful that I am in a position to do so. But in case I wasn't, I just don't see how this is legal.

 

[caannie]

If I understand correctly, and I may not, this is what a lot of credit cards do. Say you have an interest-free balance that you can pay off in a year before it starts accruing interest, but you make a purchase of something new that will accrue interest. The credit card will credit your payment to whatever is going to generate the most money for the company. So if you charge something it's going to credit your payment to the zero interest balance and charge you interest on the balance that is subject to interest charges. It's a sneaky trick they do whenever there's a promotional interest rate. You can basically never use your credit card again unless you paid off the promotional charge first, because all payments are credited to the 0% balance and not the balance that's being charged interest.

 

[ThisVNchick]

If I understand correctly, and I may not, this is what a lot of credit cards do. Say you have an interest-free balance that you can pay off in a year before it starts accruing interest, but you make a purchase of something new that will accrue interest. The credit card will credit your payment to whatever is going to generate the most money for the company. So if you charge something it's going to credit your payment to the zero interest balance and charge you interest on the balance that is subject to interest charges. It's a sneaky trick they do whenever there's a promotional interest rate. You can basically never use your credit card again unless you paid off the promotional charge first, because all payments are credited to the 0% balance and not the balance that's being charged interest.

Yes, what you said is exactly what happened.

I’ve never encountered such sketchiness. I thought that when I made that return, they would credit the actual purchase first. Because when I read the statement, it shows I made a purchase (3 items with different reference numbers). Then it shows I made the return and those same items being returned (based on the reference number) with the return price in red. So I thought that purchase was being credited back. In fact, when I spoke to the first 7 account supervisors, they couldn’t even figure out why the system was doing that. They said the same thing I did. They can see I bought the items and returned the exact items but couldn’t figure out why I was still forced to pay for the purchase. The whole thing is super misleading.

The agent today was able to tell me, in detail, how the money was allocated but couldn’t elaborate why it was done this way. She kept saying “I’m sorry I can’t explain it further” like she was purposing dodging my question about why this practice is legal. When I mentioned seeking legal counsel, she quickly said, let me speak this over with my manager and give you a call back. I know she isn’t going to call me back because all of the other agents said the same thing (gave me a time and date) and of coursed never called back. It was someone new each time and I always had to re-explained the problem.

Paid the remaining balance today and cancelled the card. I do spend a lot at NM and the 5:1 points ratio made it worthwhile to keep using it but this experience just made me realize why I should just stick to my Amex.

 

[onlyk]

Yes, what you said is exactly what happened.

I’ve never encountered such sketchiness. I thought that when I made that return, they would credit the actual purchase first. Because when I read the statement, it shows I made a purchase (3 items with different reference numbers). Then it shows I made the return and those same items being returned (based on the reference number) with the return price in red. So I thought that purchase was being credited back. In fact, when I spoke to the first 7 account supervisors, they couldn’t even figure out why the system was doing that. They said the same thing I did. They can see I bought the items and returned the exact items but couldn’t figure out why I was still forced to pay for the purchase. The whole thing is super misleading.

The agent today was able to tell me, in detail, how the money was allocated but couldn’t elaborate why it was done this way. She kept saying “I’m sorry I can’t explain it further” like she was purposing dodging my question about why this practice is legal. When I mentioned seeking legal counsel, she quickly said, let me speak this over with my manager and give you a call back. I know she isn’t going to call me back because all of the other agents said the same thing (gave me a time and date) and of coursed never called back. It was someone new each time and I always had to re-explained the problem.

Paid the remaining balance today and cancelled the card. I do spend a lot at NM and the 5:1 points ratio made it worthwhile to keep using it but this experience just made me realize why I should just stick to my Amex.

It may not help but try to talk to NM's account manager and tell them what you had done and what a good customer you are by having them look into your account of all the big purchases you had made and, casually mention you will be afraid of making any purchases from them again if this thing doesn't get resolved to your satisfaction since it is honestly a mistake, and ask them is there anything they can do for you? Give it a last ry before you closing NM account?

 

[RJY]

I had something similar happen with my Amazon card. Got a big ticket item at 0% for a year. It was fine until I put other Amazon purchases (subscribe and save subscriptions) on it. Once I did, the same thing happened as it did to you. They straightened it out after multiple escalations. But then in order to make sure all payments got credited appropriately afterwards, I had to call them every month and tell a live agent exactly how much of my payment to credit towards new purchases (full amount) and how much to the 0% interest purchase (equal monthly payments). I gradually changed the subscriptions to my regular credit card because the monthly phone calls and constant explaining the math to the representative got annoying. Once the 0% purchase was paid off, I never used that card again. Not worth the headache. Like caanie said, it's sneaky, but a lot of them do it.

 

[whateve]

I had something similar happen with my Amazon card. Got a big ticket item at 0% for a year. It was fine until I put other Amazon purchases (subscribe and save subscriptions) on it. Once I did, the same thing happened as it did to you. They straightened it out after multiple escalations. But then in order to make sure all payments got credited appropriately afterwards, I had to call them every month and tell a live agent exactly how much of my payment to credit towards new purchases (full amount) and how much to the 0% interest purchase (equal monthly payments). I gradually changed the subscriptions to my regular credit card because the monthly phone calls and constant explaining the math to the representative got annoying. Once the 0% purchase was paid off, I never used that card again. Not worth the headache. Like caanie said, it's sneaky, but a lot of them do it.

Same thing happened to me with paypal credit. They said I had to call to tell them where to apply the payments, even though the obvious method would have been the promotions that were expiring first.

 

[ThisVNchick]

It may not help but try to talk to NM's account manager and tell them what you had done and what a good customer you are by having them look into your account of all the big purchases you had made and, casually mention you will be afraid of making any purchases from them again if this thing doesn't get resolved to your satisfaction since it is honestly a mistake, and ask them is there anything they can do for you? Give it a last ry before you closing NM account?

Oh I have done this and they are willing to keep adjusting the interest for me, if that is what I choose to do (just keep paying what I am suppose to pay, not the crazy amount the system shows). While it is tempting, it is not worth my time. I would have to call in each month and explain the whole situation. I think my time is worth much more than what they're offering. And it shows me that they know what they're doing is wrong (hence their willingness to accommodate me as best as possible) but they won't admit it and won't fix it (even though I know it can be done)! There is just no reason for me to keep funding a greedy company.

 

[ItsPurseonal]

It sounds like you’ve already got your answer on legality, but in case it’s helpful, I think this article explains the concept (and its origins) well.

From the article:

“Most of the time, having your issuer apply your excess payment to the highest-interest balance is the most cost-effective option. But the Card Act makes an exception for deferred-interest offers, often found on store cards and medical cards. That's because leaving those "no interest if paid in full" balances for last can have expensive consequences.

Deferred interest is different from the 0% APR offers you see on bank credit cards. Here's how:

• With a 0% APR card, you are not charged any interest during the 0% period. That interest is waived entirely. Once that period is up, you can be charged interest only on outstanding balances going forward.
• With a deferred-interest offer, by contrast, if you have not paid off the purchase in full at the end of the interest-free period, you will be charged retroactive interest going back to the original purchase date.

Suppose you buy a $1,000 washing machine on a store card that promises no interest on that purchase if you pay it off within 12 months, and 24% APR after that. After 12 months, you’ve only paid off $500. You’ll get charged 24% APR on $1,000 originally borrowed, not the $500 left unpaid.

Now say you have multiple balances on that card — because you continued to use it at the store, making purchases that did not have deferred interest — and have been making only partial payments. In that case, avoiding retroactive interest would be almost impossible. That's because the Card Act requires your issuer to apply most of that money to your highest-interest balances, not your deferred-interest balance.

Enter the Card Act's exception for deferred interest cards. This rule stipulates that in the two billing cycles before a deferred-interest offer expires, the issuer must apply any amount paid over the minimum payment to the deferred-interest balance first. This exception makes it slightly easier to avoid retroactive interest. But it doesn't make you immune from such charges, so stay vigilant. Read your statements and make sure you're on track to pay off your balance on time.”

 

[onlyk]

It sounds like you’ve already got your answer on legality, but in case it’s helpful, I think this article explains the concept (and its origins) well.

From the article:

“Most of the time, having your issuer apply your excess payment to the highest-interest balance is the most cost-effective option. But the Card Act makes an exception for deferred-interest offers, often found on store cards and medical cards. That's because leaving those "no interest if paid in full" balances for last can have expensive consequences.

Deferred interest is different from the 0% APR offers you see on bank credit cards. Here's how:

• With a 0% APR card, you are not charged any interest during the 0% period. That interest is waived entirely. Once that period is up, you can be charged interest only on outstanding balances going forward.
• With a deferred-interest offer, by contrast, if you have not paid off the purchase in full at the end of the interest-free period, you will be charged retroactive interest going back to the original purchase date.

Suppose you buy a $1,000 washing machine on a store card that promises no interest on that purchase if you pay it off within 12 months, and 24% APR after that. After 12 months, you’ve only paid off $500. You’ll get charged 24% APR on $1,000 originally borrowed, not the $500 left unpaid.

Now say you have multiple balances on that card — because you continued to use it at the store, making purchases that did not have deferred interest — and have been making only partial payments. In that case, avoiding retroactive interest would be almost impossible. That's because the Card Act requires your issuer to apply most of that money to your highest-interest balances, not your deferred-interest balance.

Enter the Card Act's exception for deferred interest cards. This rule stipulates that in the two billing cycles before a deferred-interest offer expires, the issuer must apply any amount paid over the minimum payment to the deferred-interest balance first. This exception makes it slightly easier to avoid retroactive interest. But it doesn't make you immune from such charges, so stay vigilant. Read your statements and make sure you're on track to pay off your balance on time.”

My IQ is above average and I also had completed high eduction I often still have hard time to understand and deal with lots of things in life especially come to finance, nowadays we need to know all or we will be penalized easily. I can't imagine how could I deal with things if I'm even not as intelligent, sigh.