Credit card companies have a vested interest in minimizing their financial losses. Consequently, if you don't pay your bills or your credit suddenly plummets, your card could be suspended. Your card company can generally continue adding finance charges to your monthly statement, but there are some limitations on this right.
Understanding Finance Charges
A finance charge is simply the interest you pay on any outstanding balance you carry on your card each month. Many credit cards compound interest daily, which means you'll have to pay interest charges each month to keep your account current. A suspended account doesn't mean your card is canceled or that your balance is paid. It simply means you can't make any more purchases. Consequently, your card company has the right to continue charging interest on your credit card balance until you pay down the balance.
Limitations on Charges
Your cardholder agreement is your primary source of information about what your credit card company can charge you. The 2009 Credit Card Accountability, Responsibility and Disclosure Act caps penalty fees at $25 the first time and $35 for repeated offenses, but does not limit interest. Instead, your contract should outline your interest rate and conditions -- such as delinquency -- that may cause finance charges to increase. If you're being charged a different rate than the one noted in your agreement, contact your card company in writing and refer to the agreement.
Paying Down the Balance
After you pay down the balance on your card, your credit card company can no longer charge you interest. This is because there can't be interest on a zero balance. If you want to stop paying finance charges, the best way to do so is to avoid gaining new debt and to pay down your balance as quickly as you can.
Third-Party Debt Collection
If your credit card company charges off your account, it may sell the account to a third-party debt collection company. These companies can continue charging financing fees but generally can't charge you a higher rate than that which was allowed by your original cardholder agreement. You also have the right to demand verification that the debt is actually yours.
- Federal Trade Commission: Fair Debt Collection Practices Act
- Bankrate: Does Law Cap Credit Card Interest Rates?
- Bankrate: How Finance Charges Are Figured
- CreditCards.com: Card Suspended? Why Your Credit's Been Curbed
- Capital One. "How Credit Card Interest Works." Accessed Aug. 31, 2020.
- Consumer Financial Protection Bureau. "Can a Credit Card Company Charge Me Interest After I Close My Account?" Accessed Aug. 31, 2020.
- Discover Bank. "How Does My Credit Card Interest Work." Accessed Aug. 31, 2020.
- Discover Bank. "Does Closing a Credit Card Hurt My Credit Score?" Accessed Aug. 31, 2020.
Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.