How payments are applied to your credit cards

Payments are applied to your credit card account in various ways from one credit card provider to the other. The credit card payments may be applied to the total balance on your credit card or to the components of the balance for example the previous months balance, balance transfers or new purchases.

The usual mechanism is that credit card companies will apply your monthly payment towards the part of your balance that attracts the lowest interest rate. This will normally include any portion of your balance covered by a promotional period interest rate e.g. a balance transfer promotional rate or 0% interest credit card offer. If this is the case any purchases that are made on the credit card will be charged at the normal credit card interest rate.

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