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+--- Thread: Credit card question re.: different interest rates - paid first? (/showthread.php?tid=105453)
Credit card question re.: different interest rates - paid first? - Speedy - 10-26-2010
I used a low rate 'courtesy check' on my credit card account. I also have regular monthly charges. I thought the credit card reform law changes required that the higher interest rate balance be paid off first from my monthly payment and then after that is paid in full then the lower interest rate balance is to be paid? My credit card company uses my payment to pay against the balance on the low rate courtesy check first and nothing is used to pay off the regular higher rate monthly charges. I used the 'courtesy check' about a year ago.
Re: Credit card question re.: different interest rates - paid first? - JoeH - 10-26-2010
The reforms only required that the credit card company spell out how they would apply your payment to your various balances. It did not specify that high interest balances be paid off first. For instance, one of my cards will apply any payment of an amount up to the minimum monthly payment to the low rate balance first. Amounts over the minimum payment are proportionally applied to the remaining balances.
Re: Credit card question re.: different interest rates - paid first? - Speedy - 10-26-2010
Thanks JoeH.
Re: Credit card question re.: different interest rates - paid first? - JoeH - 10-27-2010
I found a summary of the changes here: http://www.defendyourdollars.org/CC%20summary_1.25.2010.pdf. It appears they do have to apply payment amounts over the minimum payment to the highest interest rate. There is an exception for the end of a promotional period, the last two months are excluded from this rule and the payments go to paying off the lower interest rate balance. But some of the provisions are phased in, so not sure if this rule and its exception are in effect yet.
There is another exception caused by the credit card issuers not being allowed to change the conditions on credit extended before the law went into effect. That may be part of what you have seen with your payments.