Question:
1026.53 - Payment Allocation reads pretty clear - payments in excess of minimum payment must be made to the balance with the highest APR and then descending until the payment is exhausted.
But "balance" is not clearly defined. One could argue there could be two different balances. Cycle to date balances (in current cycle) or cycled balances (prior cycle)
For example; suppose a card holders billing cycle is the 1st – 31st with a payment due date of the 21st. The account has the following balances that rolled over from prior cycles;
$10,000 BT Promo at 0%
$225 Purchase at 11.99%
On the 21st the card holder makes their minimum payment of $25 which is applied to interest, fees and balances on the account in accordance with Regulation Z.
On 23rd the card holder makes a $500 purchase at 11.99% and a $2000 cash advance at 12.99%.
On the 28th the card holder makes an additional payment to the account of $3000. Should the additional (excess) $3000 payment be in the following order;
$2000 to the cash advance balance at 12.99%.
$700 the purchase balance at 11.99%
$300 to the BT Promo at 0%
or
Do not apply any of the excess payment to the transactions that occurred in the same cycle.
Alternatively, the payment is applied to the balance in the prior cycle:
$200 to the purchase balance at 11.99%
$2800 to the BT Promo balance at 0%
and nothing to the cash advance balance
What is correct?
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