BestBuy.Com

[vferrari]

Just wanted to pass along my personal experience as a warning to those who are using the BBY/HSBC card for promotional deferred interest purchases and how minimum payments are applied to avoid an interest charge trap.   Note that this is not the same issue as the deferred interest "surprise" many cardholders are getting hit with and posting about.  I understand that issue and frankly it is spelled out pretty clearly on the statement with reamining balance on each promotional item, the minimum payment due, the promotion expiration date, and the deferred interest charge if the promotional balance is not paid off by the expiration date all broken out separately in a nice little box. 

However, there is another more subtle "Gotcha!" that applies because of the HSBC policy on how minimum payements and excess payments are applied to promotional balances (also stated in the fine print on the statement but not as clearly broken out as the deferred interest charges and promotional balance expiration dates).  Specifcally, HSBC will apply paymens in excess of the promotional minimum payment amounts and the overall minimum payment amount to PROMOTIONAL  BALANCES EXPIRING WITHIN THE NEXT 60 DAYS of payment BEFORE applying any excess payment to REGULAR PURCHASE charges.  The upshot of this is that payments that you think cover your regular purchase amounts plus the minimum payments of any promotional balances will not be applied in a logical and safe manner that protects you against unwanted interest charges.  For example, if you owe $50 in regular purchases and two promotional balances of $50 each (with one of those two expiring within 60 days of the this months payment date - each requiring a minimum payment of $0.50 each), you would think that the minimum payment required  to cover your regular purchases and the minimum payment on the promotional balances would be $51 ($50 + $0.50 + $0.50).  However, HSBC will apply some portion greater than $0.50 of the $51 payment to the promotional balance expiring within 60 days BEFORE they apply it to regular purchases.  This means that you will come up short on your regular purchase payment of $50 BECAUSE SOME PORTION OF IT (UP TO THEIR DISCRETION) GOT APPLIED TO THE PROMOTIONAL BALANCE THAT DOESN'T EXPIRE FOR UP TO ANOTHER 60 DAYS!  The result is that you will owe interest on whatever reguar payment balance was not covered PLUS ANY REGULAR PURCHASES THAT YOU MAKE IN THE MEAN TIME UNTIL YOU CLEAR THE REGULAR PURCHASE BALANCE!  This clearly makes no sense but it is written down (though in vague language) and sets the cardholder up for unexpected interest payments.  To avoid this SURPRISE, you would need to pay off your PROMOTIONAL BALANCE UP TO 60 DAYS EARLY to enable excess payments to be applied to regular purchase balances, which kind of defeats the whole purpose of having a deferred payment promotion.  This looks to be malicious compliance with the credit card laws applied in HSBC's favor and sets the cardholder up to surprise interest payments.  I really wish BBY would look into this at best unfair and possibly illicit practice by their credit card partner.

This practice is a change in the way minimum payments are applied to minimum promotional and regular purchase balances implemented this year by HSBC supposedly in compliance with the new credit card laws, but I fail to see how this protects the consumer in any way.  Especially fo those who are meticulous with making on time payments, who understand the risks of deferred interest charges, and who want to take maximum advantage of the Best Buy payment promotions.  Best Buy needs to realize that this severely undercuts their company's credibility because in effect it cuts two months of the promotional period that is advertised as a deferred no intererest, minimum payment, same as cash transaction if ANY regular credit card purchase transactions are conducted within the 60 day expiry period.  A response by a Best Buy Community Counselor, Social Media team member on this deceptive practice would be appreciated.

[CrystalWoW Community Veteran]

This is how it is required by the credit card act that specifically spelled out this exact processing. Sounds like they did it perfectly as the law requires. It is not by any means deceptive. The credit card act changed how the payments are processed to this exact methodology.

[vferrari]

Crystal,

It's deceptive because unlike the deferred interest promotional balances that are broken out with appropriate warnings including explicit due dates and deferred interest amounts, there is only a vague fine print statement that does not explicitly spell out to the cardholder exactly how payments in excess of the minimum payment will be applied in the specific case at hand only that it is up to HSBC's "discretion".  There is not explicit warning for less than 60-day promotional balances, they are all highlighted starting at the 90-day point.  Furthermore, it is counterintuitive the cardholder that excess payments WILL NOT BE APPLIED to regular purchases which are immediately subject to interest charges if not paid in full by the due date in preference to deferred promotional balances that will not be OVERDUE FOR 60 MORE DAYS!  It is deceptive to provide a promotional balance due date 60 days in the future that must de facto be paid in full during the current billing period to ensure that payments get applied to regular purchases that are subject to an immediate interest charge if not paid in full.  Since the distribution of excess payment is subject to HSBC's discretion, they have chosen to implement the law in a manner that sets up the consumer for unintended interest charges when the cardholder is attempting to make good faith minimum payments for promotional balances THAT ARE NOT YET OVERDUE plus complete payments to the billing period's regular purchases.  I completely understand that the deferred interest liabilities are explicitly spelled out and the misunderstandings are typically the due to lack of attention to or understanding of the explicit and clear statement warnings by cardholders.  But this is a more subtle issue, that can trap the knowledgeable and vigilant cardholder - in that case, I consider it deceptive.

[Ryan-BBY Senior Social Media Specialist]

Hello vferrari -

Melissa from our Social Media team, will be reaching out to you regarding your concern. Thank you for your continued patience!

[Melissa-BBY Senior Social Media Specialist]

Hello vferrari,

Thank you for taking the time to share your concerns regarding the way your credit card payments have been applied to your Best Buy credit card account. I am sorry to read that this process was not as clear as it could be.

Unfortunately, as much as I would like to be able to clear this up for you, HSBC is a very separate company from us and therefore we do not have direct access to or influence over their accounts or policies. I do know any payments are applied based on the recent credit card laws that were put into effect. From this, it is my understanding that payments are distributed to apply all minimum payments that are due, then excess payments should be applied to plans that have financing charges due. Lastly, if there are payments remaining, they should be applied to the interest free financing plans in the order that they are due to expired.

If this is not how your payment was applied or you have specific concerns with your account, this would need to be looked into by HSBC. I would be happy to look into this further with you and HSBC, if you were to provide me details, including the name and phone number from the account, via private message using the link in my signature below.

Sincerely,

[vferrari · Accepted solution]

Thanks for getting back to me. I understand HSBC's policies and practices are separate from BBY, however, since BBY continues to use this company as its credit provider, and since its vague and possibly deceptive policies therefore reflect badly on BBY, I felt compelled to (1) warn other HSBC credit card uses avoid the trap I fell into and (2) let BBY know so that the company can look into and possibly correct these practices since they could affect BBY's bottom line as customer's walk away due to the poor customer service experiences with HSBC. Thank you.

[CrystalWoW Community Veteran]

I still suggest you take it up with the government that passed the credit card act that requires the allocation to be EXACTLY how HSBC does it.

[Jimmienomam]

Link to Credit Card Act of 2009:

http://www.gpo.gov/fdsys/pkg/BILLS-111hr627enr/pdf/BILLS-111hr627enr.pdf


Sect. 104.164

‘‘(1) IN GENERAL.—Upon receipt of a payment from a card-
holder, the card issuer shall apply amounts in excess of the minimum payment amount first to the card balance bearing the highest rate of interest, and then to each successive balance bearing the next highest rate of interest, until the payment is exhausted.
‘‘(2) CLARIFICATION RELATING TO CERTAIN DEFERRED INTEREST ARRANGEMENTS.—A creditor shall allocate the entire amount paid by the consumer in excess of the minimum pay- ment amount to a balance on which interest is deferred during the last 2 billing cycles immediately preceding the expiration of the period during which interest is deferred."

If the payments weren't disbursed as above then call local judicial system to bring charges up.

Sounds like the 60 day "problem" was because of this law. HSBC had NO leeway and sounds like they adhered to the laws. In case you missed the 2nd portion, for the last 2 billing cycles all payments go to the minimums for each purchase after that they specifically go to promo items.

Sounds like your rage should be turned towards the government and not HSBC.