when a business gets too greedy

About 6 or 7 years ago, I changed phone companies and closed my account with Sprint. After I paid the final bill, Sprint mailed me another statement indicating that I still had a balance due of one cent. I was tempted to let them send a collection agency after me, but obviously my credit score wasn't worth ruining over 1 penny. So I mailed them a check for one cent.

Earlier this week, I paid off the outstanding balance on a closed account with Chase Bank, and the customer service rep at Chase acknowledged that I still might receive one last bill for a few cents, due to interest.

Here's a question: if the account is closed, and the balance due is less than, say, 50 cents wouldn't it be more profitable for the company to take the loss rather than mail out a bill?

The flaw with my idea is that some penny pinching customers who owe, say, $20 would only pay $19.50. But there's got to be a smarter way for Sprint to do business, because the only one who profits from this absurd transaction is the U.S. Post Office.

I had a health care facility do that to me. I paid the bill in full and they sent me a bill for 5 cents. I couldn't believe it. So, I sent them a check for a dollar so they would have to refund me 95 cents. Which they did and yes, I deposited it.

When I paid off my student loans, back in the days when you actually mailed a paper check, I asked how much it was to fully end the loan. The lady on the phone told me $xxx, but that was today. She recomended mailing in $xxx + $10, and then they would send me a check for the few dollars they would owe me. That's what I did, and that's what they did. I once overpaid a bill by $.05, and just expected them to take $.05 off of my next bill. Nope. I got a check for $.05. I keep it thumbtacked to my wall at work.

Quote: reno

About 6 or 7 years ago, I changed phone companies and closed my account with Sprint. After I paid the final bill, Sprint mailed me another statement indicating that I still had a balance due of one cent. I was tempted to let them send a collection agency after me, but obviously my credit score wasn't worth ruining over 1 penny. So I mailed them a check for one cent.

Earlier this week, I paid off the outstanding balance on a closed account with Chase Bank, and the customer service rep at Chase acknowledged that I still might receive one last bill for a few cents, due to interest.

Here's a question: if the account is closed, and the balance due is less than, say, 50 cents wouldn't it be more profitable for the company to take the loss rather than mail out a bill?

The flaw with my idea is that some penny pinching customers who owe, say, $20 would only pay $19.50. But there's got to be a smarter way for Sprint to do business, because the only one who profits from this absurd transaction is the U.S. Post Office.

I think it's more likely a matter of the way their systems are designed versus an issue of greed. Zero balances make sense. Non-zero balances don't, they're not clean. As you say, for certain balances, the cost of the postage and processing is over the bill itself. When companies issue bills for low amounts, it's just liking issuing a standard bill: no special programming required to handle that case versus creating specific logic for small amounts, which may introduce other side effects into their systems...

Quote: TheBigPaybak

I think it's more likely a matter of the way their systems are designed versus an issue of greed. Zero balances make sense. Non-zero balances don't, they're not clean. As you say, for certain balances, the cost of the postage and processing is over the bill itself. When companies issue bills for low amounts, it's just liking issuing a standard bill: no special programming required to handle that case versus creating specific logic for small amounts, which may introduce other side effects into their systems...

Why not program the computer to ignore small balances? They could write it off as a loss for tax purposes. For a big company like Sprint or Chase, all that postage adds up...

What is this, "Superman 3?"

Seriously though, making a slight overpay is required even in the computer age. In my title work career I have had to tell hundreds of people that you have to overpay to close the account. I deal with internal accounting daily and believe me being off even a penny is a huge deal to write off. You just have to live with sending extra and getting the refund.

It really depends upon how the software was designed.

The software I use at my day job (system administrator for an electrical supply company), is designed to not send statements under a certain threshold. It's really not a big deal to put into the software.

Then, once a year, we print a report of all accounts that have a small balance and haven't done business for at least several months. We then write them off.

It's usually just a handful. Takes about 10 minutes to take care of.



A service industry such as a phone company should be able to do the same thing. Yeah, don't add anything extra to the system to automatically wipe them out, but something to not print the statement is simple. Then print a report and write them off regularly. No big deal, and although the write off will cost in labor time, it will actually save money.

It's short-sighted companies that would rather send out a bill for 1 cent.


Edit: Sending extra and getting a refund simplifies things, but sending that refund, even though it's an automatic process, cost more than if the customer shorted the company a penny (or more!) and they wrote it off.

If its a huge deal for the company when a closed account balance is off by a penny - why do they assume it is "no big deal" for a person ?

Maybe that person has his own accounting system, and overpaying a bill causes inconveniences for him ?

Quote: MangoJ

If its a huge deal for the company when a closed account balance is off by a penny - why do they assume it is "no big deal" for a person ?

Maybe that person has his own accounting system, and overpaying a bill causes inconveniences for him ?

If you want to avoid the issue you need to pay in person in cash on the day you want to close. Otherwise since you cannot guarantee mail times you have to add some float. My guess is there would be complaints if the creditor got to "keep the round down."

Quote: AZDuffman

What is this, "Superman 3?".

Quote of the day... :)

Ideally companies would send out a letter thanking you for your business, wishing you well, and leaving the door open for your return- eliminating the final pennies to make everyone's day a little easier and brighter.

That said, for companies that don't have the time or budget to handle the change in their systems for whatever reason, or are just too short-sighted, charging people for the balance I wouldn't characterize as being greedy, though.

I remember as a teenage my mother changed phone companies. She received a bill with a final closing balance of 5c with a note at the bottom saying "no payment required at this time" because the balance was so small. It was their policy for small balances like this to roll over to the next months bill when it had grown to a larger amount. So my mother didn't bother paying. Next month she received another bill for 5c with the same note that payment wasn't required at this time. This went on for about 5 years with a bill coming every month until she finally rang them up to alert them to the stupidity of it all.

At the time it would have cost them probably 20c just to send out one bill. You'd think they'd have people smart enough to work out the stupidity of it all.

How would you, the consumer feel if it didn't work in your favor? At what amount would you care? $1? .50c? What if you found out that shorting customers a nickle added up to hundreds of thousands in profit for the company? Is that "fair"?

I think the extra work and postage to settle accounts exactly makes the world a better place. It keeps my post office open.

Quote: Ayecarumba

How would you, the consumer feel if it didn't work in your favor? At what amount would you care? $1? .50c? What if you found out that shorting customers a nickle added up to hundreds of thousands in profit for the company? Is that "fair"?

I think the extra work and postage to settle accounts exactly makes the world a better place. It keeps my post office open.

The original point was not about rounding the bill up or down, and thus 'cheating' anyone. The point was, when the business is closing out someone's account, and thus will not be billing them anymore, does it make sense to go through the billing process to recover less money than what the process costs them?

I'm sure every business has a decent understanding of what it costs them to send out a bill, including postage. And how much it costs them to receive a check in the mail, and get it into the bank. If the amount being billed is less than the total cost amount, for an account that is closed, how can it make sense to spend more than the business will recover?

Quote:

The point was, when the business is closing out someone's account, and thus will not be billing them anymore, does it make sense to go through the billing process to recover less money than what the process costs them?

You might have told a person you wanted to close the account but as far as the computer is concerned any account with a positive balance, even one cent, is still open and active.

A business cannot simply disregard balances of one cent or ten cents because how do they know that the customer didn't leave that amount in the account on purpose? Maybe he wants to keep the account open because it looks better on his credit history? Or maybe he's having temporary financial problems that don't won't allow him to use that account right now but he'll be able to use it again in 6 months? Or maybe he's shopping around for a better company so he opens an account with someone else and then decides he liked the old company better, so he closes the new account and doesn't have to go thru the trouble of re-registering with the old company.

Quote: tsmith

Quote:

The point was, when the business is closing out someone's account, and thus will not be billing them anymore, does it make sense to go through the billing process to recover less money than what the process costs them?

You might have told a person you wanted to close the account but as far as the computer is concerned any account with a positive balance, even one cent, is still open and active.

A business cannot simply disregard balances of one cent or ten cents because how do they know that the customer didn't leave that amount in the account on purpose? Maybe he wants to keep the account open because it looks better on his credit history? Or maybe he's having temporary financial problems that don't won't allow him to use that account right now but he'll be able to use it again in 6 months? Or maybe he's shopping around for a better company so he opens an account with someone else and then decides he liked the old company better, so he closes the new account and doesn't have to go thru the trouble of re-registering with the old company.

The OP was talking about an account he had with Sprint, not a money account. We are discussing when you have closed your account with some business, and after you have paid your supposed final bill, the business determines you owe some piddly amount more, and then bills you for $.15. I would bet everyone has had this happen to them at least once. I did. I sent them an email and asked if they seriously thought I was going to spend $.40 to send them $.10. I got back a letter saying not to worry about it, they would just close the account in a couple of months

Speaking of Sprint, let me tell you a story. If I get a bill I will pay well over the balance, generally about four months of the average bill, to save on stamps and time. Once with Sprint my bill went over my credit balance by about $1, so they sent me a bill for said amount. This happened while I was on vacation, and I didn't pay the bill on time, but when I did I sent way over, like $1,000. However, because I missed the deadline I not only got hit with a hefty late fee but they secretly put on their "rip off" plan, where I paid about ten times as much for long distance. My next bill was not pretty. Suffice it to say that because I was a few days late paying a buck I probably paid about $200 in penalties.

Quote: Wizard

I probably paid about $200 in penalties.

Ouch!

well, cell phone companies have managed to screw me consistently even today in various ways they dream up, such as allowing expensive programs to be turned on, and stay on, by the most inadvertent accidental goof imaginable...

suffice it to say I put them up there with car mechanics for the least trustworthy of businesses.

Quote: odiousgambit

Ouch!

well, cell phone companies have managed to screw me consistently

Thats why I only get Tracfone. You can even get a
smartphone with them now. No surprises, I always
know where I stand. This one is sixty bucks.


Slider QWERTY Keyboard
Mobile Web
Bluetooth® Wireless Technology
2.0 Megapixel Camera & Video Recorder
MP3 Player
MMS Picture Messaging
LCD Color Display
Voicemail, Call Waiting, Caller ID
Text Messaging
Hands-Free Speaker
Voice/Sound Recorder
Downloadable ringtones & more using Airtime
Auto Redial
Key Pad Lock
Hearing Aid Compatible (HAC) Rating: M3/T3
Phone Book with up to 1,000 Entries
Polyphonic Ringtones
Alarm Clock
Lightweight - 4.55 ounces
Battery life with up to 7 hours of talk time and up to 14.5 days of standby time
Includes Battery, Charger and Services Guide
TracFone Airtime Balance Display shows you how much airtime you've used and how much is left, so you control your costs