SavingsTalk.com

DrTrade · 10-31-2007, 02:06 PM

I am told that my credit card payments goes to the lowest interest rate balances first? How can this be legal?

ForexPros · 10-31-2007, 02:06 PM

It can.

coolio · 10-31-2007, 02:06 PM

because they state that in their terms up front (though not in bold) ... they also state in their terms and conditions that by using the card you agree to their terms

Apsdydrr · 10-31-2007, 02:06 PM

The second poster is correct, it's all explained in the terms and conditions and by using the card you agree to them.

Wastedspace · 10-31-2007, 02:06 PM

It is perfectly legal, and is designed to maximize the interest income of the card issuer. For example, your purchases are subject to interest of 8 percent and your cash advances are subject to interest of 15 percent. You take a cash advance of $500 and you make purchases of $500. You have a balance of $1,000 and you make a payment of $400. Your payment will eliminate $400 of your $500 purchases and you will now be subject to 15 percent interest on $500 and 8 percent interest on $100.

The only way you can return to the lower interest rate is to pay off the entire balance. If you continue making purchases, and especially if you only pay the minimum each month, you will never stop paying the 15 percent rate. As long as you owe any amount at the end of each month, even $50, it will be subject to the higher rate.

The best way to use a credit card is to charge only as much as you can pay in full each month. Any debt that you carry to another month is the worst kind of borrowing you can do. Credit card companies love people who carry a balance. They have them by the you-know-what for the rest of their lives.

Pilot · 10-31-2007, 02:06 PM

Creditors have all kinds of little tricks to generate fees and interest, but its all in the fine print that you have to sign to get the card. You really have to read all of the fine print if you want to fully understand how the card works.

Here's a practice that some use: If you live on the west coast, your payment gets mailed to the east coast, and vise versa. It doesn't cost them anything to do it this way, but it generates late payment fees on some people that wait til the last minute to mail their payment, because of the added mail time. Then after you miss a payment, they can raise your interest.

Alex3 · 10-31-2007, 02:06 PM

Everyone is right........ if you dont read ther terms before you sign you might get screwed or not understand what is going on.

alien · 10-31-2007, 02:06 PM

It is legal because it was stated clearly in the terms and conditions along with the agreement. People do not realize but this actually HELPS you. Paying off the lower interest rates first allows that lower balance to be taken care of. The bad thing is you still get interest on the larger rate. If this is a problem, make sure that you can always pay back what you owe in full the next month. That way it does not matter b/c you do not have to worry about interest at all. Another helpful tip is to not add on a balance transfer until your card balance is $0. This prevents you from having two different rates. If you want to do a transfer at 0% for 12 months, clear out the balance and then add the transfer. This way there will be no interest and all of your payments will be going directly to the transferred amount.

10-31-2007, 02:06 PM	#1
DrTrade Greenhorn Join Date: Jul 2006 Posts: 35 Rep Power: 6	I am told that my credit card payments goes to the lowest interest rate balances first? How can this be legal? I am told that my credit card payments goes to the lowest interest rate balances first? How can this be legal?

10-31-2007, 02:06 PM	#2
ForexPros Piggy Bank Join Date: Jul 2006 Posts: 55 Rep Power: 6	I am told that my credit card payments goes to the lowest interest rate balances first? How can this be legal? It can.

10-31-2007, 02:06 PM	#3
coolio Greenhorn Join Date: Jul 2006 Posts: 21 Rep Power: 6	I am told that my credit card payments goes to the lowest interest rate balances first? How can this be legal? because they state that in their terms up front (though not in bold) ... they also state in their terms and conditions that by using the card you agree to their terms

10-31-2007, 02:06 PM	#4
Apsdydrr Greenhorn Join Date: Sep 2007 Posts: 33 Rep Power: 5	I am told that my credit card payments goes to the lowest interest rate balances first? How can this be legal? The second poster is correct, it's all explained in the terms and conditions and by using the card you agree to them.

10-31-2007, 02:06 PM	#5
Wastedspace Greenhorn Join Date: Jul 2007 Posts: 22 Rep Power: 5	I am told that my credit card payments goes to the lowest interest rate balances first? How can this be legal? It is perfectly legal, and is designed to maximize the interest income of the card issuer. For example, your purchases are subject to interest of 8 percent and your cash advances are subject to interest of 15 percent. You take a cash advance of $500 and you make purchases of $500. You have a balance of $1,000 and you make a payment of $400. Your payment will eliminate $400 of your $500 purchases and you will now be subject to 15 percent interest on $500 and 8 percent interest on $100. The only way you can return to the lower interest rate is to pay off the entire balance. If you continue making purchases, and especially if you only pay the minimum each month, you will never stop paying the 15 percent rate. As long as you owe any amount at the end of each month, even $50, it will be subject to the higher rate. The best way to use a credit card is to charge only as much as you can pay in full each month. Any debt that you carry to another month is the worst kind of borrowing you can do. Credit card companies love people who carry a balance. They have them by the you-know-what for the rest of their lives.

10-31-2007, 02:06 PM	#6
Pilot Greenhorn Join Date: Jul 2006 Posts: 8 Rep Power: 0	I am told that my credit card payments goes to the lowest interest rate balances first? How can this be legal? Creditors have all kinds of little tricks to generate fees and interest, but its all in the fine print that you have to sign to get the card. You really have to read all of the fine print if you want to fully understand how the card works. Here's a practice that some use: If you live on the west coast, your payment gets mailed to the east coast, and vise versa. It doesn't cost them anything to do it this way, but it generates late payment fees on some people that wait til the last minute to mail their payment, because of the added mail time. Then after you miss a payment, they can raise your interest.

10-31-2007, 02:06 PM	#7
Alex3 Piggy Bank Join Date: Jul 2006 Posts: 80 Rep Power: 6	I am told that my credit card payments goes to the lowest interest rate balances first? How can this be legal? Everyone is right........ if you dont read ther terms before you sign you might get screwed or not understand what is going on.

10-31-2007, 02:06 PM	#8
alien Piggy Bank Join Date: Jul 2006 Posts: 63 Rep Power: 6	I am told that my credit card payments goes to the lowest interest rate balances first? How can this be legal? It is legal because it was stated clearly in the terms and conditions along with the agreement. People do not realize but this actually HELPS you. Paying off the lower interest rates first allows that lower balance to be taken care of. The bad thing is you still get interest on the larger rate. If this is a problem, make sure that you can always pay back what you owe in full the next month. That way it does not matter b/c you do not have to worry about interest at all. Another helpful tip is to not add on a balance transfer until your card balance is $0. This prevents you from having two different rates. If you want to do a transfer at 0% for 12 months, clear out the balance and then add the transfer. This way there will be no interest and all of your payments will be going directly to the transferred amount.

SavingsTalk.com

Your guide to saving money and making smart investments!