Cash Advance on a Credit Card

[Anonymous]

If you take a cash advance on a credit card, does the CC company lump the repayment into the total amount that you owe?  Do you have the option of repaying the advance off first since the rate is higher?  I am not, nor will I ever, take out a cash advance, however I wanted to understand the process.  Thanks in advance.

[itsjustmeibe]

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@Anonymous wrote:

If you take a cash advance on a credit card, does the CC company lump the repayment into the total amount that you owe? YES

 Do you have the option of repaying the advance off first since the rate is higher? NO, your payments will always go towards the balance which has the lowest interest rate first.

A cash advance should never be taken out on a card with a balance unless you intend on paying it in full (along with whatever balance was already on your card) 

 I am not, nor will I ever, take out a cash advance, however I wanted to understand the process.  Thanks in advance.

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[FretlessMayhem]

CCCs typically keep charges with different interest rates separate from one another, in terms of how your payments are allocated.

Lets say you have a balance of $100 on your credit card from normal purchases, under your normal interest rate of 10%. Then you take out a cash advance for $50 on your credit card, under the cash advance rate of 29%. Your new balance is $150, and you mail in a payment of $50 on your account. They allocate that payment to the lower interest rate balance, so you have then $50 accruing interest at 10%, and $50 accruing interest at 29%. 

They always apply your payment to the balance with a lower interest rate so they can continue to collect interest on the balance with the high interest rate. Does that make sense? 

I believe the credit card bill of rights bill that was recently signed into law forces CCC's to apply payments to the highest interest rate balances first when it takes effect in July 2010. I'm pretty sure that provision was in there, but can't recall exactly. 

Does anyone remember? 

[Anonymous]

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@FretlessMayhem wrote:

I believe the credit card bill of rights bill that was recently signed into law forces CCC's to apply payments to the highest interest rate balances first when it takes effect in July 2010. I'm pretty sure that provision was in there, but can't recall exactly. 

Does anyone remember? 

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"On May 20th, the House passed the final version of the Credit Cardholders’ Bill of Rights, H.R. 627 and the President signed the bill into law on May 22nd...[it will] require 45-days’ advance notice of interest rate, fees, and finance charges hikes, require payments to be applied fairly to the highest interest rate balance first, and strengthen credit card protections for young people..." (source: www.speaker.gov/newsroom/legislation?id=0303) 

Yup, you're recalling correctly.

[score_building]

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@Anonymous wrote:

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@FretlessMayhem wrote:

I believe the credit card bill of rights bill that was recently signed into law forces CCC's to apply payments to the highest interest rate balances first when it takes effect in July 2010. I'm pretty sure that provision was in there, but can't recall exactly. 

Does anyone remember? 

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"On May 20th, the House passed the final version of the Credit Cardholders’ Bill of Rights, H.R. 627 and the President signed the bill into law on May 22nd...[it will] require 45-days’ advance notice of interest rate, fees, and finance charges hikes, require payments to be applied fairly to the highest interest rate balance first, and strengthen credit card protections for young people..." (source: www.speaker.gov/newsroom/legislation?id=0303) 

Yup, you're recalling correctly.

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one notable loop hole is apparently only payment in excess of the minimum payment must be applied to the highest interest rate first.

still looks like a rather big improvement.