@neveroptedin Pay more than the minimum? That extra money can't just sit on your cheapest balance. Does your statement show it working that way? #credit... See more
The claim
Under Regulation Z (12 CFR § 1026.53(a)), except as provided in paragraph (b), when a credit card account has balances at more than one APR, the card issuer must allocate any amount paid in excess of the required minimum periodic payment first to the balance with the highest annual percentage rate and any remaining portion to the other balances in descending order of APR.
The receipt
(a)General rule. Except as provided in paragraph (b) of this section, when a consumer makes a payment in excess of the required minimum periodic payment for a credit card account under an open-end (not home-secured) consumer credit plan, the card issuer must allocate the excess amount first to the balance with the highest annual percentage rate and any remaining portion to the other balances in descending order based on the applicable annual percentage rate.
i. Assume that a credit card account has a cash advance balance of $500 at an annual percentage rate of 20% and a purchase balance of $1,500 at an annual percentage rate of 15% and that the consumer pays $800 in excess of the required minimum periodic payment. Under §1026.53(a), the card issuer must allocate $500 to pay off the cash advance balance and then allocate the remaining $300 to the purchase balance.
(i) Last two billing cycles. The card issuer must allocate any amount paid by the consumer in excess of the required minimum periodic payment consistent with paragraph (a) of this section, except that, during the two billing cycles immediately preceding expiration of the specified period, the excess amount must be allocated first to the balance subject to the deferred interest or similar program and any remaining portion allocated to any other balances consistent with paragraph (a) of this section; or
What the rule doesn't say
It governs the amount you pay above the minimum — not how the minimum payment itself is applied. It covers credit card accounts under open-end plans that aren't home-secured. And there are exceptions in paragraph (b): deferred-interest balances near the end of their promotional period, and certain requests for a different allocation, which the issuer is permitted — not required — to follow.
What you can do
Check your statement for balances at different APRs — purchases, cash advances, promotional balances — and whether any of them is a deferred-interest balance with an end date coming up.
Consumer info, not financial advice.