Where do payments get applied to during 0% APR promo period?

[Absolution16]

After reading this particular thread that was discussed a year ago, a question began to linger in my mind:

http://ficoforums.myfico.com/t5/Credit-Cards/Using-a-CC-with-a-Balance-Transfer-without-added-intere...

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When your card is in the promotional period of 0% APR for purchases and 0% APR for balance transfers, where do your payments get applied to?

For example, let's say that you charged $500 in puchases, did a balance transfer of $500 in the first month of your promotional period, and then got charged $15 (3% of the $500) balance transfer fee. If you then made $300 as your first payment, where does that $300 payment get credited to?  Your purchases?  Your balance transfer?  Your balance transfer fee?  Or do they get distributed in some predetermined ratio, or divided equally?

I've tried searching around for answers here, but I was unable to do so.

[Anonymous]

It depends on the card. Some specify that purchases after balance transfers have no grace period, like Chase or sometimes if you pay your purchase balance in full you'll maintain the 0% on balance transfers like Barclay and Capital One. Most card member agreements will tell you how payments/interest is applied.

[Absolution16]

Thanks for your response.

Right now, I am not talking about a scenario where you only have the 0% on balance transfers.  I am referring to a scenario where you have 0% on both the purchases and balance transfers.  In that scenario, you don't have to worry about where the payments get applied to, as long as you pay off everything before the promo period ends.

STILL, if you owe $1,015 like I had described in the hypothetic scenario in my opening post, and you make $300 for your very first payment, I'd like to know how the bank applies that payment towards your differing balances.

@NRB525 in the post I linked above, explained the mechanics very thoroughly, but in my example, you have exactly the same APR for both purchases and balance transfers.  So if your rate is exactly the same, then which one gets the priority in having payments be applied to first?  That is the question I'd like answered at the moment.

[Anonymous]

I'm not 100% sure, but I think it would be to the transfer fee and then maybe equally to the remaining balance depending on when the promotion(s) end.

[Anonymous]

Hi OP, let me share what was explained to me by Discover, for my very similar situation.

Currently, I'm in the last three months of a 12 month/0% APR promo, and the balance at a little over $5k. All well and good, so long as I pay THAT balance before the promo runs out.

I completed a BT of $10k from another bank card to my Discover card, a few days ago, and I took advantage of Discover's promo for 12 months / 0% APR / 3% BT fee. So, now I have two concurrent 0% promos. The Discover CSR explained that any payments I make (now) will be applied to the combined balances, and after the promo ends for my initial balance of $5k (assuming that portion is not paid off), any payments will first be applied to the balance with the lowest interest rate (more money for Discover if they can charge me interest on the higher rated balance, as we know).

I think it's a matter of making note of where your balances are for each promotion you use, as you've already done, and try to PIF before promos run out. If you can't PIF, try moving the remaining balance to another card on a BT promo.

Hope that helps!

[Absolution16]

Hi Doebear,

Thank you for sharing your experience with us.  That was a very handy information.

One thing that I feel that needs a little more clarification is what Discover means by "combined balances."  Let me explain.

So you have a balance a little over $5,000, as well as $10,000 from BT.  For the next 2 months, both are at 0% APR promo period.  So let's assume that you make a payment a few days before the 0% purchase APR promo is over, at the amount equivalent to what you put into the card as purchases.  Let's just say it is $5,100.

When that payment of $5,100 gets posted, where is Discover going to credit you?  It has to go somewhere: either to your balance in your purchases or to your BT.  Since the APR is exactly the same on both the purchases and BT for the next 2 months, the order in which Discover applies that payment is a mystery.

If they somehow credit that payment all towards your balances for your BT, then after 2 months, they will be free to charge you interest on that ~$5,000 charges you put on the card as purchases, and it won't be pretty.

I'd really like a clarification on this, and I am hoping that an online chat can help me answer this question.

[Absolution16]

Well, I just came off online chat and here was their explanation:

When you have multiple promotional balances on your account with the same rate, the payments will be applied to the balance that expires first.

That pretty much sums it up for me.

Way to go Discover!  Thank you for a simple, clear cut answer!

[Anonymous]

That's much better than Walmart with their deferred interest promotions. I have multiple balances expiring at different times and I have to call them or hop on chat when the payments post and request them to reallocate the payments the way I need them applied.

[Anonymous]

Exactly, it follows that payments will go, in this concurrent 0% promo case, to the oldest balance. I love these online chat functions, so helpful for people like me who remember what else they meant to ask on the phone after hanging up! All the best to both our PIF journeys!