Credit Card Payment Allocation | Understanding It
The balance of your credit card does not really constitute a single large credit card balance, especially if you have made various types of transactions, any combination of purchases, balance transfers or cash advances. These balances are in fact separate, and monthly credit card payments can be divided between balances or applied to a single balance.
Having Different interest rates | Credit Card Payment Allocation
You can have different interest rate balances with various transactions on your credit card, purchases, and cash advance or equivalent cash advance. Your balances may also have different interest rates if you activate the fine by exceeding your payment for more than 60 days. The interest rate will return to the normal amount of the existing balance after six payments at the time of expiration, but in the case of new purchases, the penalty fee may still accrue.
Payments are divided between balances | Credit Card Payment Allocation
Assuming you want monthly credit card payments to be gull or at least the highest interest rate balances and you desire different interest rate balances. Get rid of the most expensive balance first. However, credit card issuers would prefer to lower the lower interest rate balance first to obtain the highest interest.
Credit Card companies used to allocate payments before the credit card act came into force in February 2010. They would often apply these payments to the balance of the lower interest rate, which would mean that higher interest balances would decrease slowly and would have a higher interest rate. As a result, many payment card holders paid more interest, needed more time to pay off their balances and did not use low-interest promotions.
How Creditors should be Paid
All credit card payments above the minimum must be applied to balances of higher interest rates. However, the minimum payment may apply to the balance with the lowest interest rate, which usually includes balances with a promotional rate. If you have balances with different interest rates, you have to pay more than the minimum to reduce the balance of the higher rate
The best way to avoid mistakes in the way you assign credit card payments is to avoid balances combined with different interest rates on your credit card. You should not transfer balances from a credit card that already has a purchase balance, or buy it with a credit card by using a hip transfer. Similarly, you should avoid cash advances on a credit card that already has a balance or makes purchases/transfers of credit card balances with a cash advance.