The Credit CARD (Card Accountability Responsibility and Disclosure) Act in the U.S. states that payment amounts made in addition to the minimum payment must be applied to balances carrying the highest APR first.
Does it apply in this situation?
Let's say I've got a credit card with a balance transfer and an amount of purchases carrying interest (from purchases made two months ago), which is causing my account to be considered a revolving account.
I make an on-time payment which covers the purchases from two months ago. After the payment, my account contains a balance transfer of $1000 @ 0% and new purchases made after my last statement in the amount of $100, which carries interest.
If I make a second payment of $100, where should it be applied according to the Credit CARD Act?
I just ran into this scenario with my credit card company, where I made a second payment intending to pay off the new purchases (as they are carrying interest) but it was instead applied to my balance transfer.
The credit card company said they apply payments to the last statement, so since I already paid off all of the purchases listed on the statement, the only balance remaining is the balance transfer. Therefore, if I make a purchase the day after my statement, I must pay interest on that purchase until the next statement is available as there is no way to pay off that purchase early.