Order of payments to Credit Card

[Deleted User]

With the changes in the law, is it now always the highest rate of interest part of a credit card loan that payments are allocated to first?

But, what about if I have several 0% transfers on one account? Do payments get allocated to the one that ends first?

Also, what if I have, say, £5000 on 6.9% apr lifetime but then do a transfer of £2000 at 2.9 for 2 years. Do any payments get credited against the higher interest first?

Could be a bummer because unless the £5000 is paid off in two years, the £2000 will ramp up to full interest. Is this right?

[Deleted User]

It'll go against the higher rate -so yes, your LOB offer. But then it will switch to paying off the 2k when it rreverts to full rate.

chexum

[quote=[Deleted User];discussion/3480751]Could be a bummer because unless the £5000 is paid off in two years, the £2000 will ramp up to full interest. Is this right?[/QUOTE]

That's a very good point - it makes me think no matter how much we force "them" to be fair, they will always find a subtle way to bite us in the back, while still appearing to be angels.

In this specific case you may want to plan whether it's better to save up £2000 in 2y to pay it off when it's back to normal rate and/or getting (in reality, hoping) for a 0% deal to do the same...

[Deleted User]

chexum wrote: »

That's a very good point - it makes me think no matter how much we force "them" to be fair, they will always find a subtle way to bite us in the back, while still appearing to be angels.

In this specific case you may want to plan whether it's better to save up £2000 in 2y to pay it off when it's back to normal rate and/or getting (in reality, hoping) for a 0% deal to do the same...

Yeh. When I thought about this it is a bit sneaky....

If I dont clear the LOB before the two years then this but goes to full rate (admitedly it will then switch payments to this full rate).

thenudeone

If you have multiple 0% offers going, the card issuer can choose which to pay off (as long as they put it in the terms).

eg: mbna will pay off the offer with the earliest START date first. They used to pay off the earliest end date but changed it when they implemented the change to the order of payments.

To play safe, wait until 1 day AFTER each offer ends, to pay it off. Then, that balance will be at a standard rate and will definitely be cleared by your payment, leaving all the other 0% balances outstanding.

[Deleted User]

thenudeone wrote: »

If you have multiple 0% offers going, the card issuer can choose which to pay off (as long as they put it in the terms).

eg: mbna will pay off the offer with the earliest START date first. They used to pay off the earliest end date but changed it when they implemented the change to the order of payments.

To play safe, wait until 1 day AFTER each offer ends, to pay it off. Then, that balance will be at a standard rate and will definitely be cleared by your payment, leaving all the other 0% balances outstanding.

I've got two balance transfers outstanding with mbna. One runs out in october (£1500) and one in march (£2000).

So you're saying if I pay £1500 just before it ends in october they may take the £1500 off the £2000 instead? Sneeky...

Yeh, I can see what you mean. If you let it go to standard rate they've gotta apply it to that. Only problem is it takes a few days for payment to be applied but I guess thats the payoff. i.e. 3-4 days interest.