The CARD act that went into effect back in February 2010, specifies that any payment above and beyond the minimum must be applied to the highest interest rate balance first.
However, the minimum payment goes to the portion of your loan with the lowest interest rate, thereby allowing the banks to continue to earn interest on the highest interest rate for a longer period of time.
Cash advance money typically carries a higher interest rate than the interest rate for regular charges. There may be a few other extenuating circumstances that would also give certain charges a higher interest rate than the typical.
Before the CARD reforms went into effect the banks used their discretion and they could apply anything over the minimum payment to the lowest interest rates first and while the reforms has improved the situation, still the minimum payment will always go to the lowest interest rate portion first. And a customer cannot request the payment to be applied any other way.
This is typically spelled out for the consumer and a major credit cardholder agreement states that ?any payments up to the minimum will be applied ?at our discretion, including in a manner most favorable or convenient for us.?
So pay extra on your credit card if you have any portion of it at a higher interest rate and avoid cash advances.
