You might be wondering why your credit card dues simply keep spiraling out of control. The basic reason for this is that once you fall into the trap of not paying your outstanding dues in full, the bank levies all kinds of fees, interest, and finance charges and then tries to recover these before applying your payments towards settling actual transactions.
Credit card payments are first applied to all overdue amounts (the oldest due being credited first) in the following order:
- Fees and other Charges
- Interest
- Balance Transfer Amount Billed (if applicable)
- Cash Advances Billed
- Retail Transactions Billed
- Balance Transfer Amount Current (if applicable)
- Cash Advances Current
- Retail Transactions Current
No wonder then that your credit card dues simply do not end — it pushes you further and further into debt. And all it takes is one part payment (anything less than the total amount due) to set you on this downward spiral.
Further reading:
- What’s Your Credit Card Usage Policy?
- Tip Tuesdays: Why You Should Not Own a Credit Card From a Bank Where You Also Have Other Deposits
- Should You Use a Credit Card or a Pre-Paid Petro Card While Tanking Up?
- Did You Know: Credit Card Companies In India Will No Longer Be Liable For Transactions That Happen Before A Card Loss Is Reported
- Case Study #4 — Why I Don’t Own a Credit Card?
{ 0 comments… add one now }