Answers about Credit Card Payments and Late Payments

Can the bank apply payments to the “purchase portion” of the account first and then to the cash advance balance?

As of February 22, 2010, there are new requirements in federal law. The bank must apply the amount paid in excess of the minimum payment to the balance with the highest interest rate. For example, if the highest interest rate applicable to your account applies to the cash advance balance, the amount of any payment you make in excess of the minimum payment would be applied to the cash advance balance.

There is an exception for deferred interest plans. A deferred interest plan is a payment plan that is typically offered at the time of purchase that permits a consumer to avoid interest charges if the purchase balance is paid in full by a certain date. Often, deterred interest plans are offered in connection with the sale of higher-priced goods, such as furniture or electronics.

For deferred interest plans:

  • you may request to apply extra amounts to the deferred interest balance before other balances; and
  • for the two billing cycles prior to the end of the deferred interest period, the credit card company must apply your entire payment in excess of the minimum payment amount to the deferred interest rate balance first.

March 2010