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AMEX not apply overpayments to higher rate balances

scooter9 3 10 February 24, 2016 at 08:39 PM More Ready Debit Deals
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I've got an amex card with a fixed rate balance transfer I've been paying down for some time. I never used the card for purchases until the past year or so, when I started making an occasional Amazon or Newegg purchase based on amex statement credit offers (as widely discussed here on SD.)

Each month I would pay the minimum + enough to cover any new purchase, plus a few $ extra. I assumed the payment above the minimum would be going to the higher-rate purchases. Admittedly I didn't pay close attention, as I didn't make many purchases, and I assumed based on revamped credit laws [creditcards.com] that it wouldn't be an issue. My experience with balances on other cards have always applied payments as expected.

I've since noticed that my balance subject to purchase interest rate has grown to several hundred dollars, and it is quite obvious that the extra payments were not being applied to the higher-rate purchases (or a best were being split proportionally between the purchases and the fixed-rate transfer.)

I tried calling tonight, got transferred to another dept, and then disconnected (probably closed for the evening.) Will try again in the AM, but wanted to see if others have had similar experiences.

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#2
I thought this was SOP for CC's?

Back in college in a finance class the prof asked "what's the first thing I advocate people to do if they are in CC debt?". His answer was not intuitive - he recommended that such people actually get another CC - but this one is "kept clean" and paid off every month. The rationale was that CC's are difficult to live without, but once you carry a balance, EVERYTHING charged to the card is also subject to the same crazy interest rate, so you're better off putting new purchases on a card that hasn't been rolled over.
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#3
Quote from scooter9 View Post :
I've got an amex card with a fixed rate balance transfer I've been paying down for some time. I never used the card for purchases until the past year or so, when I started making an occasional Amazon or Newegg purchase based on amex statement credit offers (as widely discussed here on SD.)

Each month I would pay the minimum + enough to cover any new purchase, plus a few $ extra. I assumed the payment above the minimum would be going to the higher-rate purchases. Admittedly I didn't pay close attention, as I didn't make many purchases, and I assumed based on revamped credit laws [creditcards.com] that it wouldn't be an issue. My experience with balances on other cards have always applied payments as expected.

I've since noticed that my balance subject to purchase interest rate has grown to several hundred dollars, and it is quite obvious that the extra payments were not being applied to the higher-rate purchases (or a best were being split proportionally between the purchases and the fixed-rate transfer.)

I tried calling tonight, got transferred to another dept, and then disconnected (probably closed for the evening.) Will try again in the AM, but wanted to see if others have had similar experiences.
Looks like promotional rates are not used to determine which balance the excess payment goes towards - the regular rate is used instead. The exception is during the last 2 months of the promo, during which the entire excess payment goes towards the promo. Your cardholder agreement will have the specifics for your card, so check that to be sure.

You can always call in and direct how the payment is applied, though that is tedious to do every month. Easiest thing to do is not use that card until the BT promo is up.
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Marshall: Have the rest of you guys figured out by now that mmathis is the smartest guy on SlickDeals?
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#4
Quote from Dr. J View Post :
I thought this was SOP for CC's?
Yes, this used to be SOP, to "bury" the higher-rate purchases under the promo rate balances so they would sit there accruing more interest. CARD act of 2009 [creditcards.com] changed this so that any payment above the minimum has to go to higher-rate balances first.
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#5
The terms of the balance transfer surely stated that you would be charged interest on purchases. This line is from a BoA balance transfer agreement:

Quote :
If you revolve your balance to take advantage of a Balance Transfer or Direct Deposit, all transactions and balances, including Purchases, will be charged interest.
Once I transfer a balance to a given card that card remains unused until the balance is paid off or transferred again.
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#6
Quote from ManUpOrShutUp View Post :
The terms of the balance transfer surely stated that you would be charged interest on purchases.
I understand that. That isn't the issue at all.

Say I have a balance transfer on the card of $1000 at 2%
I make a purchase of $100 at 15%
Say my minimum payment due for the month is $50.

That $50 they can apply to whichever balance they want. Obviously they will apply it to the 2% balance. If I pay $150, that extra $100 is supposed to go to the higher rate balance. So next month, assuming no new purchases, the balance should be $950 at 2%. (since the extra $100 should go to pay off the new purchase.) Instead it is like $860 at 2% and $90 at 15%

(For simplicity's sake I am not including the few $ of interest one way or the other.)

So they are essentially "burying" the higher-rate purchase under the lower-rate transfer. Which is what we all would expect a bank to do. But this is exactly the thing they are not supposed to be able to do since the new CC laws in 2009 [creditcards.com].
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#7
are you paying the overage right when the transactions post? I ran into this issue with Chase where my charge posted, I paid it right away but it went towards the balance transfer. The way they get around it is by making payments towards your STATEMENT balance first before any unbilled charges. So the way you have to do, make your purchases, wait for the statement to cycle, then when you pay above the min due it will apply correctly. You will be charged more interest because the charges will have to sit in your account until the statement prints. If you need to do a charge on it, do it closer to the cycle end date so its not on your statement collecting interest for 25 days.
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