What part am I paying off?

graeme2911

Just trying to understand how a CC provider handles your repayments, and what "part" of your debt you are paying off with each repayment.....


Scenario:
Applying for a new card which offers 1.5% balance transfer fee & 0% for 6 months on purchases, and 18% after the 6 months.

Will be balance transferring £3000, and also purchasing flights next month for £600.

If I paid £100 off for 6 months, how does the CC company differentiate between the £3000 and £600? Would the 6x £100 be paying off the flights or the balance transfer? Could they say the 6x £100 went towards the balance and therefore I owed interest on the flights?


Hope this makes sense.

Thanks.

Wilkco123

Repaying on credit cards would pay the most expensive debts first, and once there paid off move onto the next most expensive debts

In this case I would think that it would go on your Balance Transfer Fee first and then Purchases thereafter,

Just out of interest though, what is your Balance Transfer offers, as you've only said how much the fee is?

graeme2911

Thanks very much.

Just a halifax one...

"0% for up to 37 months from account opening on balance transfers within the first 90 days.
0% for 6 months from account opening on purchases.
An initial 3% fee applies, we'll then refund 0.45% on balances transferred within the first 90 days"

Wilkco123

So, the 1st repayment you make will cover the Balance Transfer fee and potentially the purchase you made for the flights. I'd maybe pay more in than £100 p/mo for the 1st 6 months to make full use of your 0% offer on purchases for 6 months as your Balance Transfer fee will be about £45.

for example £45 + £600 = £645 / 6 months = £107.50 p/mo for the 1st 6 months and then pay £100 thereafter to pay back the remaining Balance Transfer which would be 31 months after purchases are paid off.

Hope this makes sense for you.

YorkshireBoy

I think you'd be wise to read the product's draft T&Cs, which are available on their website...


http://www.halifax.co.uk/creditcards/help-guidance/terms-and-conditions/balance-transfers-and-purchases/


See condition 6.1 (2nd sentence), where you'll find that the 'allocation of payments' order is cash advances, purchases, then BTs.