Extra Credit Card Payments

Aug 25, 2019 by

credit cardsSo you’ve at last got enough extra cash to throw more than the monthly minimum payment at the credit card debt you built up over the holidays. Or maybe you’re executing a do-it-yourself debt payoff plan with the aim of ridding yourself of high-interest debt’s stranglehold on your financial well-being. Good for you! But exactly how is your credit card issuer supposed to be applying that extra payment to your debt?

All Debts Are Not Created Equal

Once upon a time credit card issuers would apply your payments so that your interest charges and hence its revenue were maximized. Big surprise, I know. So if you had different categories of debt outstanding in your credit card account—maybe a balance transfer at a special, low rate and purchases you made directly to the account—extra payments would be applied first to the debt with the lowest APR. This practice helped credit card issuers keep you in debt shackles longer and squeeze as much cash as possible out of your bank account, which of course is the mission of high-interest debt purveyors.

CARD Act of 2009

In 2009 along came the Credit Card Accountability, Responsibility and Disclosure, or CARD, Act. The CARD Act included these provisions:

  • Card issuers generally are prohibited from increasing the interest rate on an existing balance unless the cardholder has missed two consecutive payments.
  • Card issuers generally are permitted to increase the interest rate prospectively on new purchases, but must give the consumer 45 days advance notice – during which time the consumer may cancel the account.
  • Credit card bills must be due on the same date each month and payments received by 5:00 p.m. on the due date must be treated as timely. Card issuers generally cannot charge a late fee unless consumers are given at least 21 days to pay their bill.
  • Card issuers are prohibited from charging an overlimit fee unless the cardholder expressly opts in to permit the issuer to process overlimit transactions.
  • Each monthly statement must include how long it will take to pay off the bill and the total cost to the consumer as a result of paying only the minimum amount due.
  • Each monthly statement must include how much the consumer should pay each month to pay the bill off in three years, the total cost to the consumer in doing so, and the savings compared to paying only the minimum payment.


  • Any extra payment beyond the minimum payment must be applied to the balance with the highest interest rate. Note, however, that credit card issuers are allowed, and you can be sure most do, apply the minimum payment to the lowest APR balance.

How Credit Card Payments Are Applied

Say you’ve got a credit card account with outstanding balances like this:

  1. Purchases: $700 @18%
  2. Cash advances: $250 @22%
  3. Balance transfer: $1,200 @1.5%

More than likely, your minimum payment will be applied to the $1,200 balance transfer oustanding. If you send $300 more than the minimum payment, the cash advance balance should disappear, and the remainder applied to the $700 purchases balance.

Is Your Credit Card Issuer Not Complying with CARD?

If it’s unclear to you that your credit card issuer is applying your payments in accord with the CARD Act, call and ask for an explanation. If you’re not satisfied, lodge a complaint with the Consumer Finance Protection Bureau.

How About You?

Do you have one or more credit card accounts with balances at different APRs? Have you checked up on the card issuer to confirm it’s complying with the CARD Act and not overcharging you interest?


  1. Ryan @ Impersonal Finance

    I’m not going to lie, I’m very thankful I no longer have credit card debts to worry about.

  2. I don’t carry a balance on my credit card; instead I use it as a tool to get free travel. The only time I got caught in a balance-carrying trap was when I was a teenager, and I just got my first credit card. I found myself in a couple thousand dollars worth of debt, but I only had one card.

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