Why accepting credit cards for bail won’t help poor individuals secure pre-trial release.

One of the recommendations made by the Santa Clara County Bail Working Group is to accept credit cards or debit cards at county jail facilities. [Revised Bail and Release Report, Page 10].  Defendants with access to a credit card will be able to avoid using commercial bail bond agencies altogether. This would allow individuals who are arrested on non-felony charges to post their bail using their own funds with more ease.[1]  While this provides an alternative to commercial bail bond companies, it may not be what is best for every defendant.

Before moving forward, I would like to point out that, under the proposal from the Bail Working Group, this form of payment would only be available to individuals arrested for misdemeanor conduct who are entitled to own recognizance release.  This means they should not have to pay anything unless the court makes a finding on the record that money bail should be imposed for public safety reasons or to ensure his or her appearance in court.  This post will address what an individual should consider before using a credit card, assuming that they are not eligible for own recognizance release.  If an individual does not have the access to the funds in their account and has a credit card, they would have the choice of using that credit card to pay the entire amount or using the services of a commercial bail bond company.

Some of the considerations a defendant should make before using a credit card to pay their bail are:  the interest rate of their credit card; the amount of time before they get that money back; and the fact that they may not receive the entire amount paid at the conclusion of their case.

While using a credit card may be the better option in some cases, paying 10% to a bail bondsman may be the better option for others.  After weighing these considerations, a defendant may find that using a commercial bail bond company to secure release prior to trial is a better option in some instances.  I do not address bail forfeiture (i.e. the process of losing your bail deposit when a person fails to appear in court).  I will be addressing the above-mentioned issues based on the assumption that the individual makes all of their court appearances.

Interest Rates for Credit Cards

In order to decide whether using a credit card to pay bail is a financially sound decision an individual has to consider the amount of interest that will accrue based on posting the bail.  This will depend on the interest rate on the card he or she plans on using, his or her current balance on that credit card, and the amount of time it will take to pay off that debt.  If an individual has no outstanding balance and knows they can pay off their credit card bill once they receive their next paycheck and before accruing any interest, using a credit card clearly beats paying a bondsman 10%.

But if that person doesn’t know when they will be able to pay or would be depending on getting that bail money back to pay their bill, paying 10% might be a better option.  If a person already has an outstanding balance on their credit card, meaning he or she has not paid their balance in full, interest will accrue on new purchases throughout the billing cycle.  Additionally, if paying bail on a credit card is treated as a cash advance as opposed to a purchase, the interest rate will likely be higher and interest will begin to accrue immediately.

The average annual percentage interest rates (APR) for credit cards is 15%, while the average rate for a new credit card is 18%.  APR represents the yearly rate of interest.  In order to calculate the amount of interest on a monthly bill, the APR is divided by 365 to calculate the Daily Periodic Rate (DPR).  The DPR is then multiplied by the balance on the card and the number of days in the billing cycle to determine interest.

For example, a person, we will call him John, is arrested for trespass and bail is set according to the bail schedule at $1,000.  John has a credit card with no balance and 15% APR.  He decides to use his credit card to post bail.  If John pays off his credit card immediately there will be no new interest because he did not have a previous balance.  If John does not immediately pay off his credit card, the first month of interest would amount to $61.64 and it would be calculated like so:

$5,000* x [15% / 365] x 30** = $61.64

*This represents the balance. This number can be calculated in different ways by credit card agencies. The average daily balance is the method most commonly used.  To keep it simple, we are assuming John posted bail on the first day of his billing cycle, making the average daily balance $5,000.

**Assuming there are 30 days in a billing cycle.

Now, if John was able to pay his bill right away, paying $61.64 in interest is a much better alternative to paying 10% [$500] to a commercial bail bond agency.  But the reality is, most people would not be able to pay $5,000 right away.  44% of middle-class Americans, defined as making between $40,000 and $100,000 a year, could not access $400 in an emergency with cash or using a credit card that they could pay off at the end of the month.  For those making over $100,000 a year, 27% could not come up with the same funds.  If those are the numbers for the well-off in our society, one could only imagine that it is very unlikely a person living in poverty could access that kind of money.

If John does not have the money to pay off his credit card at the end of the month, the balance would roll over and continue to accrue interest. If a person is unable to make their monthly payments, there will be financial penalties.  For example, the penalty APR for the American Express Blue Card is 29.49% and applies for at least six months.  This means if a person misses their credit card payment, their interest rate can double.  The penalty for a late payment can also be a flat fee, the Capital One Venture card penalty fee is up to $35.

Assuming John’s interest rates are the same for his outstanding balance, and his minimum payment covers the interest accrued each month, it would only take 9 months for the amount spent on credit card interest to exceed the 10% paid to a commercial bail company.  That is the best case scenario.  It is easy to see how John’s payments could exceed that amount in shorter time with higher interest rates and penalties.  For example, if the bail payment is treated as a cash advance, the interest rate would be higher than the APR rate that John is accustomed to and interest would accrue immediately.

In the end, for interest rates and penalty fees to matter when considering how to pay bail, a person has to have access to credit.  This means having a credit card and available credit on that credit card.  The reality is that a majority of poor Americans are less likely to have access to credit.  This is one of the reasons poor communities turn to payday lenders to access cash in emergencies. [Payday Lending in America, page 31].  According to the Federal Reserve, 39% of households making less than $40,000 in income have no credit card.  [Economic Well-Being of U.S. Households, 2014, page 28].  Only 32% of households in that category have consistently paid their credit card balance in full in the last year.

In order to receive a credit card, an individual must qualify.  Without “good” or “excellent” credit a person will not receive a credit card with lower interest rates and may not qualify at all.  The majority of Americans have what is considered “bad” credit and the credit cards available for those with “bad” credit have APRs of up to 25%.  Additionally, people with no credit or “credit invisibles” are less likely to get access to credit cards.  Poor people and people of color are the most likely to be credit invisible or have what is called an unscored record, an older credit history with no corresponding credit score.  30% of consumers in low-income areas are credit invisible while an additional 15% have an unscored credit record.  Blacks and Latinos are more likely than their white or Asian counterparts to have no credit or unscored credit.  [Data Points: Credit Invisibles, page 6].  Paying bail with a credit card isn’t an option for those without credit- individuals who are less likely to be white and more likely to be poor.

How long could it take to have my money returned?

In short, the answer is that it could be months and maybe even longer than a year. While listening to KQED Forum in January, a listener named Tom called in to tell his story about his experience posting his own bail.  Tom alleges that after having the charges against him dismissed it took 8 months for him to get the $25,000 he posted for bail returned to him. [Forum on KQED, 49:50].  I don’t know where Tom was arrested and there is no way to verify his account, but this story stuck with me.  How long does it take to get bail money back after the resolution of a criminal case?

According to the Santa Clara Superior Court website, bail is refunded by check within 30 days after the resolution of the criminal case to the individual who posted bail.  If the individual who posted bail was not the defendant, California law requires that the deposit of bail be returned within 10 days after that individual submits the original receipt showing they posted bail.  There is nothing in the Penal Code section regulating cash deposit [Part 2, Title 10, Chapter 1, Article 5 of the California Penal Code] that indicates the amount of time the county must return bail to the accused individual.

It is important to remember that these time restrictions only come into play once the case is resolved, whether that be by plea deal or after trial.  When a person is out-of-custody, his or her first court appearance, the arraignment on the complaint, is usually set 6 weeks from filing the complaint.  A Santa Clara County Deputy Public Defender stated she has seen arraignment occur up to 6-10 months later.  Some cases will resolve with a no-contest plea at the arraignment, other cases will take longer to resolve or will go to trial.  In misdemeanor cases, a person who is out-of-custody is entitled to go to trial within 45 days.  Realistically, individuals who are out of custody often “waive time,” opting to allow more time for case preparation and investigation.

What does this mean for individuals who have deposited their own money for their bail?  It could be a long time before they get that money back—6 weeks at the earliest.  If a person is depending on receiving that money to pay off their credit card bill, they will incur interest and potentially penalties, making using a credit card an expensive method of posting bail.

If I posted my own bail, how much will I get back after fines and fees?

Two possible things can happen: if the accused is found innocent, the court will return the full amount of their deposit; on the other hand, if a person enters a no-contest plea or is otherwise convicted of their offense, they won’t receive the whole amount back.  This is because there are a multitude of fines and fees that the court can impose during sentencing.  For example, in misdemeanor cases, the court must impose a restitution fine when a person is convicted of a crime, unless there are “extraordinary reasons for not doing so” and those reasons must be stated on the record.  The amount of restitution can range from the $150 statutory minimum to $1,000.   The court can impose a state penalty of $10 for every $10 collected for fines, fees, or penalties under Penal Code 1464.

Those fines and fees will come out of the money that the court already has – the bail deposit.  Under Penal Code section 1297, the court can take any fines, fees, and restitution award out of the deposited bail before returning the remainder (if there is any) to the individual.  That means the individual is unlikely to receive the full amount they deposited with the court.

Once again, if an individual used a credit card hoping to pay off that credit card bill at the conclusion of their case when their money is returned, they would be unable to do so.  This person would continue to accrue interest on their credit card balance.  A similarly-situated individual who posted bond using a commercial bail agency will still have to pay the same fines and fees, but instead of that amount coming out of their bail deposit, that amount can be paid based on an interest-free payment plan with the court.

In the end, unless an individual has the funds to pay their credit card bill and is not depending on receiving their bail deposit back from the court, paying 10% to a commercial bond makes more sense financially.  This is because the system is built to benefit these companies and not individuals who post their own bail.  Commercial bail companies don’t post the cash with the court, they post a bond or promise to pay.  Even if they fail to hold up their end of the bargain and the defendant fails to appear at his or her court date, the procedure for getting the bail bond companies to pay up is filled with so many loopholes, there are few situations where they end up paying.

Although allowing people to post bail with a credit card may help some people, it isn’t helping the people most adversely affected by the bail system.  Poor individuals who cannot afford bail to begin with certainly cannot afford credit card debt and likely have limited resources from which to pay their credit card bill.  As illustrated above, a person can’t depend on having their bail deposit returned to pay that bill because he or she won’t be getting that money back for some time and, if they are convicted, will have fines and fees taken out of their deposit.  This is all assuming that a person has a credit card to use in the first place.  In the end, this would merely be a patch on the sinking ship that is the money-bail system.


[1] California Government Code section 6159 permits counties to accept bail payments for non-felony conduct using credit cards, debit cards, or cash transfers.