If you have never given much thought to how your credit card balance is paid off then you are not alone. It’s definitely worth knowing a bit about it, however, as how your outstanding balance is paid off can have an effect on how much you end up paying in the long term. Luckily for consumers, credit card issuers are now required to adhere to something called the positive payment hierarchy.
But what is this and how does it work? Essentially, the positive payment hierarchy exists to make sure that any credit card debt that is charged at a higher rate of interest than the rest of your balance is paid off first. The idea behind this is to help to limit the amount of interest that is paid on purchases.
For example, this often applies to balance transfer cards. If you transfer a balance from an old card to a new one, you will usually be able to pay off the transferred balance at a 0% rate of interest. H Read more…