How Payments are Applied
The way in which credit card companies use your payments can vary from one company to another. Your payment may be applied to the overall amount owing or to the various parts owing (e.g. fees, the previous month’s balance, new purchases or balance transfers).
Most credit card companies put repayments towards the part of your balance with the lowest interest rate first (e.g. any special rate that you might be benefiting from such as a 0% balance transfer rate). In this case, until you have cleared the low interest bearing part of your balance, any other purchases you make will be charged interest at the normal rate.
For example, if you have a balance of £500 that is transferred to another card at the rate of 0%, and you then make a new purchase of £100, the total owing on you card will be £600. If you pay £50 off at the end of the month you will still owe a total of £550. The interest on the remaining amount will be calculated such that the £50 you have paid will go to clear the 0% interest bearing part of the balance. Now you will be left with £450 that has a 0% interest rate and £100 that has the standard interest rate.
The Summary Box will tell you how the payments you make are applied to your account.
