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April 28, 2006

How Are My Credit Card Payments Applied?

When payments are received, your account is credited with the payments in the following priority:

Previously billed

  • interest

  • cash advances

  • purchases, fees and charges that are interest-bearing

  • purchases, fees and charges that are not yet interest-bearing

    • To be billed (or "unbilled") - cash advances

  • purchases, fees and charges

    • If you look at each of these as buckets, it's easier to understand how your payments are applied. Once the first bucket, "previously billed interest," is reduced to zero (emptied), payments are applied to the second bucket, "previously billed cash advances," and so on until all your payment dollars have been applied.

    On the next statement date, the credit card system checks to see if all the buckets (except "to be billed purchases") are zero and, if so, the interest accrued on the retail balance is waived.

    Interest calculated on a cash advance is NEVER waived, regardless of whether a full or partial payment is made. When partial payments are made, interest accrues on the reduced principal and is charged on the next statement.

    Posted by Colin on April 28, 2006 11:48 PM | Permalink | DIGG THIS STORY

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