Negative Payment Hierarchy

L

Lothaar

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I read some articles on Fool.co.uk about negative payment hierarchy. This is the term for the order in which credit card providers pay off your balance. The transactions with the lowest rate of interest are knocked off the balance first, followed by the transactions with the next-lowest rate... and so on.

Does this happen in Ireland too?

(BTW - first post. Hi everyone.)
 
I don't know of any card that charges different interest rates for different purchases so I don't know how this would apply here. Unless it applies in the case of no/low interest rate balance transfer offers - e.g. no/low interest on the balance transfer but the normal rate on new transactions (purchases/cash advances etc.) and then money is used to clear the no/low rate balance before the new transactions which are subject to interest charges? In any case a quick scan of the terms & conditions of any specific card would clarify.
 
Lothaar said:
I read some articles on Fool.co.uk about negative payment hierarchy. This is the term for the order in which credit card providers pay off your balance. The transactions with the lowest rate of interest are knocked off the balance first, followed by the transactions with the next-lowest rate... and so on.

Does this happen in Ireland too?

(BTW - first post. Hi everyone.)
Click to expand...

Usually yes. If you don't pay off your full balance every month, what you do pay towards it goes against your most recent purchases so you pay interest on the older purchases even though people seem to think that they repayments go against these items. Its contained in all the terms and conditions of the credit cards.
 
That's it - balance transfers at 0% get cleared first. So any purchase or cash advance you make will not be paid off until you clear the whole sum of the balance transfer. If you transfer €1,000 at 0% and then make a €100 purchase at, say, 15% APR, you'll have to pay off the full €1,000 before the purchase is cleared. Meanwhile, the purchase sits there gathering interest.

Also cash advances sometimes have a higher APR than purchases, I think.
 
Just to clarify - there is nothing underhand or mysterious about this. It's all set out in the card terms & conditions. But many (most?) people don't bother reading them.
 
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