howtofreetravel

If I take a purchase do I need to pay it off same day so it doesn't gain interest ? or can I wait. I have a small balance on 0% interest.

mia

Read the terms of the card. If any payment will be applied to the lowest interest balance first there would be no way to pay for the new purchase until you pay off the full balance, but your card may be different.

howtofreetravel

From what I understand only the minimum payment goes to the lowest interest This is with Barclays btw

g8trgr8t

that would be the first card I have ever seen that on. Chase, Citi, BOA all payment goes towards lowest interest rate first. If you need to use the card for anything other than carrying the 0% debt, you don't take out the 0% loan

garykung

Data point - this practice has been banned by the Credit CARD Act of 2009.

All payments must now apply to the balance with the highest interest rate first.

mia

Thank you. If howtofreetravel makes a purchase today and makes a payment in the same amount as soon as it posts will the payment be applied to that purchase? -OR- must he wait until the statement is generated for the system to see it as a "balance" with a higher interest rate?

sdsearch

Are you absolutely sure?

I though it was a bit more complicated, as in the minimum payment will go to the lowest interest rate, but everything above the minimum payment will go to the highest interest rate. If so, you would need to pay the minimum payment plus everything charged anew (plus maybe a bit extra to cover interest on the latter?) to make sure nothing carried over at a higher interest rate to the next statement cycle.

See here - the confusion appears to be that it worked one way in an early version of the act but changed in the final version of the act:

http://bucks.blogs.nytimes.com/2010/...loophole/?_r=0

garykung

Yes in most of the case.

This is how the law is written:

"Upon receipt of a payment from a cardholder, the card issuer shall apply amounts in excess of the minimum payment amount first to the card balance bearing the highest rate of interest, and then to each successive balance bearing the next highest rate of interest, until the payment is exhausted."

So it is clear that all payments in excess of the minimum payment will apply to balances with the highest balance first.

What about minimum payment?

This is how Chase does it:

"We will calculate the minimum payment as the larger of: 1) $25 (or total amount you owe if less than $25); or 2) the sum of 1% of the new balance, the
periodic interest charges, and late fees we have billed you on the statement for which your minimum payment is calculated."

This is how Citi does it:

"Your “Minimum Payment Due” equals:
• Any amount past due; plus
• Any Overlimit Amount; plus
• The greater of:
1. The New Balance, if it’s less than $25;
2. $25 if the New Balance is at least $25;
3. 1% of the New Balance (rounded to the nearest dollar), plus any
billed interest or minimum interest charge, plus any late fee; or
4. 1.5% of the New Balance (rounded to the nearest dollar).
The Minimum Payment Due is never more than the New Balance."

My interpretation is, unless you have done a BT, promotional purchase offer or cash advance in the billing cycle, the new balance will be assessed interest based on the ADB method. So to most people, it really means all payments will apply to balances with the highest balance first.

howtofreetravel

I got the offer for 15k miles if I spend 500 every month for 3 months.. I really wanna do it, but also not mess up the 0% offer so what's the best way to go here?

mhdena

Put the card away until you've paid off the balance.

garykung

Check how the minimum payment is calculate with your card.

If your payment is more than the new balance, you should be fine.

r.brown

I received the same offer and in the past (on the same Barclays card) when I have purchased something after a 0% balance, my payment went to the new purchases.

Barclays is one of the better cards with how they handle this.

Example.

$10k balance transfer with 0%
Barclays will require a 1% minimum payment, so $100 on your statement

You spend $500 on the card and let's pretend the annual fee also hits of $79 (what mine is).

At the end of the statement, it will tell you that you need to make a certain minimum payment and what it is to avoid paying any interest.

It should say $579 to cover the new $500 spent and the $79 annual fee in my example. You should not have to pay anything towards the 0% balance as your $579 payment is greater than 1% of the new balance of $10k + $500 + $79.

I never had to specify where to apply my payment, etc. Barclays handles it all pretty well automatically. The key is to read one of the last paragraphs on your statement where it spells out what payment to make to avoid any interest.

Oreto

I'll add my data point but it doesn't appear to apply to the OP.

I can't speak for Barclay's but Citi and Chase will ding you for interest under that scenario because avoiding interest requires one to enter any given statement with a zero balance. Balance transfers will usually not satisfy that requirement. If Barclay's is different, that's good to know but I don't think that I've ever taken one from them.

Therefore, the $500 +$79 would garner interest (if from Citi or Chase) and my guess is that it would be close to the minimum interest charged by the issuer. As soon as the statement cuts and you are being charged interest, pay the minimum plus $580 or whatever the new charges + interest totals and you should be OK as the value of the miles should be greater than potential interest.

rasheed

Chase indicated on some recent 0% checks that I would lose the ability to make new charges interest free unless I paid off everything on the following statement.

Capital One has this interest saver concept that tells you how much to pay to allow you to keep the 0% balance going and still pay off new charges.

Rasheed

pallhedge

I'm struggling to understand your post. I totally get how Citi and Chase compute your minimum payment due. However, from that you interpreted how they apply your minimum payment. I don't know how you drew that line.