How does 0% apr and 19% apr mix?

[ori68]

So I have the Citi Access More card and I have a balance of $700 ish. Im awaiting to get my statement credit to cover $650 of that which should be 2-3  statements from what I was told. That amount is at 0% apr. I don’t plan to pay that off, I’m waiting or the statement credit. Since im carrying a balance, can I buy things on the credit card and pay them off before the end of the credit card cycle and avoid the late fees, or will that 0% apr cause me to pay interest on it.

In case that did not make much sense, here goes my second try.

 If I have 0% apr on $700, and I buy $100 at 19% apr, and pay $100 before statement closes, does the money I pay count towards the 19% apr or the .0% apr?

[Anonymous]

You'll have to look at the fine print of your agreement to be sure, but usually payments are applied to the balance with the lowest interest first.

You'd end up paying 19% on the purchases and taking a purchase size bite out of your 0% balance. Probably not what you want.

[ori68]

So I have the Citi Access More card and I have a balance of $700 ish. Im awaiting to get my statement credit to cover $650 of that which should be 2-3 statements from what I was told. That amount is at 0% apr. I don’t plan to pay that off, I’m waiting FOR the statement credit. Since I’m carrying a balance, can I buy things on the credit card and pay them off before the end of the credit card cycle and avoid the INTEREST fees, or will that 0% apr cause me to pay interest on it.

In case that did not make much sense, here goes my second try.

 If I have 0% apr on $700, and I buy $100 at 19% apr, and pay $100 before statement closes, does the money I pay count towards the 19% apr or the .0% apr?

Edited: Sorry, English is not my first language

[Anonymous]

In your example you'd most likely end up with $600 @ 0% and $100 @ 19%. It's a sneaky strategy banks use to make money on 0% offers.

[Anonymous]

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@Anonymous wrote:
You'll have to look at the fine print of your agreement to be sure, but usually payments are applied to the balance with the lowest interest first.

You'd end up paying 19% on the purchases and taking a purchase size bite out of your 0% balance. Probably not what you want.

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I don't think they can do that anymore. (Card act?) I know I questioned Chase re: how my payments were applied on my Amazon account. I thought the new rule was they couldn't do that, but it's not quite that simple. They can take part and do this with, part and do that with. 

Not the best source but from here: http://www.bankrate.com/finance/credit-cards/8-major-benefits-of-new-credit-card-law-2.aspx

"A close look at your card agreement will likely reveal a clause that explains that payments will be applied to lower-rate balances first. Not so anymore. The Credit CARD Act requires above-the-minimum payments to be applied first to the credit card balance with the highest interest rate."

[Erusidhion]

    I have a promotional balance on my Wal-mart currently and I do use my Wal-mart card every month to show activity. I usually pay the minimum (or any extra) plus what little charge I put on it to show usage and I've never paid any interest. The Card Act may be working as intended. I haven't looked at the Card Act thoroughly but from what the above post says; it's probably working the way they said because I've never had to pay any interest on my Wal-mart card even after putting on a charge in addition to the already existing promotion 0% apr balance.

[ksantangelo23]

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@Anonymous wrote:

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@Anonymous wrote:
You'll have to look at the fine print of your agreement to be sure, but usually payments are applied to the balance with the lowest interest first.

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I don't think they can do that anymore. (Card act?) 

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Relating to the CARD act, It's correct that any excessive payments (higher than minimum) will be applied to the balance subject to the highest interest, regardless of the timing.

Monday - $1,000 16% APR Purchase

<APR is increased due to what ever reason, with fair warning>

Tuesday - $1,000 25% APR Purchase

Wednesday - Pay $1,000, and it would pay off Tuesdays purchase.

[Anonymous]

Yes. I have heard that one. It does not always work out to benefit the consumer though. Comapnies like DISCOVER will NOT allow the consumer to allocate their payments how the wish. Are you kidding me? What year is this? They added 0% on future purchases to a family members account, who carries a balance... She should be able to call in and say she wants this amount applied here, and this amount applied there. Yes I get it that for the average consumer, the card act does benefit them, and its less of a hassle. But still. If they only want to make lower payments for a while, they will only be applied to the 0 percent stuff, when if they were applied to ther higher percent it would save them money. Lol but ya, this person is crazy and needs to pay it off or do a balance transfer anyway. At least its only 13% APR and not a huge amount!

[Anonymous]

Here are two personal scenarios I have experience with recently:

A.  Amazon, Walmart, and Care Credit (and I imagine any Synchrony card) where 0% financing is already in effect: Any new purchase made on these cards that don't qualify for any special financing terms (eg, that would immediately be subject to the 25%+ interest rate for purchases) are automatically paid off FIRST (ie, payments are allocated to repay these charges in full before they're applied to any 0% financing items, and there's no loss of grace period)

B.  Capital One, FNBO, and Chase balance transfers at promo rates (eg, 0%): if you read their T&C, payments are applied to the 0% balance first up to the minimum payment amount and then any excess goes to the new purchase. I believe this is in accordance with the CARD act posted by Tortoise.

Here's the language from Cap One with regard to the above scenario: "We generally apply payments up to your minimum payment first to the balance with the lowest Annual Percentage Rate (APR) including 0% APR, and then to balances with higher APRs. We apply any part of your payment exceeding your minimum payment to the balance with the highest APR, and then to balances with lower APRs."

Also they give an example for better illustration: "Let's say you use a check or transfer $1,000 with this promotional offer. No matter how else you use your card, that part of your balance has a 0% APR for 12 months. Then you make a $100 purchase with your card. Purchases are charged 15.9% variable APR the month after you begin carrying a balance. If you pay the entire $1,100, you will not pay any interest charges."

I'm not completely sure which scenario your situation would fall under OP, but if I had to guess, I'd guess it'd be B unless your T&C explicitly states otherwise. It's basically saying you lose your grace period. Using your example, it seems like if your minimum payment is $25, and you make a payment of $125, then $25 would go to repaying the 0% portion of your balance (ie, the $700), and $100 would go to repaying your new purchase in full. However, you'd still get hit with interest on the $100 regardless.

[takeshi74]

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@ori68 wrote:

Since im carrying a balance, can I buy things on the credit card and pay them off before the end of the credit card cycle and avoid the late fees, or will that 0% apr cause me to pay interest on it.

In case that did not make much sense, here goes my second try.

 If I have 0% apr on $700, and I buy $100 at 19% apr, and pay $100 before statement closes, does the money I pay count towards the 19% apr or the .0% apr?

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Definitely read your terms as they contain your answer and terms can vary from creditor to creditor.  You only have to pay prior to the due date to avoid late fees.  However, avoiding interest is a completely different matter.  If you're carrying a balance odds are you have no grace period on new purchases.  As stated above, most creditors allocate payments above the minimum to the balance with the highest rate but, again, you'd need to refer to your terms to confirm these matters.

If you have a balance at 0% and new transactions are not at 0% I don't suggest using the card until the 0% balance is paid off.