Ralph E. Stone Global News Centre

(SAN FRANCISCO) The Credit Card Accountability, Responsibility and Disclosure (CARD Act) changed how credit card issuers must apply your credit card payments.

With a credit card, it’s possible to borrow money at different interest rates. For example, you could transfer a balance from another card to take advantage of a zero percent introductory rate. Meanwhile, you could have purchased an item (or items) subject to a purchase rate of 14.99 percent. Maybe you wrote a credit card convenience check that was charged a cash advance interest rate of 19.99 percent.

The CARD Act states that when a cardholder sends more than the minimum payment (extra money), the additional payment must be applied to the highest interest rate portion of the balance. However, when you send only the minimum payment, it is typically applied to the balance with the lowest rate.

The CARD Act change ensures that extra sums are applied to the balance with the highest interest rate first. This is good for consumers because they end up paying less in interest on their total card debt over the long term.

However, if you buy something under a “deferred interest” plan (meaning you are allowed to make payments for a specific time period with no accumulating interest), you can choose to apply any part of a payment over the minimum to the deferred interest balance. This can help you pay off the interest-free balance before the deadline, when retroactive interest is charged on the entire amount you borrowed if you haven’t paid in full by that time. If you don’t request this, only the last two payments you make before the deferred interest period ends will be applied to the deferred interest balance automatically. This may not be enough to pay the balance in full and thereby avoid retroactive interest.

The CARD Act benefits consumers.  Consumers can help themselves by paying more than the minimum which will help them retire  debts earlier.  Consumers should also consider carrying only one interest rate balance on their cards at one time.  And avoid cash advances, convenience checks, and promotional offers on any card used for regular purchases.

_______________________________________________________________________________

Global News Centre writer Ralph E. Stone was born in Massachusetts. He is a graduate of both Middlebury College and Suffolk Law School. We are very fortunate to have this writer’s talents in this troubling world; Ralph has an eye for detail that others miss. As is the case with many GlobalNewsCentre.com writers, Ralph is an American Veteran who served in war. Ralph served his nation after college as a U.S. Army officer during the Vietnam war. After Vietnam, he went on to have a career with the Federal Trade Commission as an Attorney specializing in Consumer and Antitrust Law. Over the years, Ralph has traveled extensively with his wife Judi, taking in data from all over the world, which today adds to his collective knowledge about extremely important subjects like the economy and taxation. You can send Ralph an email at this address [email protected]