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Credit CARD Act of 2009 Minimum Payments

How are minimum payments calculated for credit cards, and how are payments more than the minimum due applied?

Under the New Discusure Act 2009 payment in excess of the Minimum Payment due are to applied to the amount bearing the highest interest! Q1. The Minimum Due payments have always been applied to Interest due first and remaining portion applied to the principles (usually he lower interested rate ammounts. However how is minimum Payment calculated if you have 2 amounts one with 4.99% [amount of $1000.00] and the other with 15.99% [amount of 2000.00]? Q2. If you make minimum payments plus 50.00 extra to reduce the higher rates---can the credit card companys not apply the over minimum in this way? The CC/Company is appling the full minimum amount to the lower amounts only "Not the Interested". Then they use the amount over minimum to apply to the interest! Is it Not required that Minimum be applied "First" to Interested Due?????

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Highlights

  • Minimum balances vary by credit card issuer and each card's terms.
  • No law sets a minimum amount due on a credit card.
  • Payments must be applied to highest interest debt first.

I believe what you are referring to is the Credit CARD Act of 2009.

Minimum Payment Defined

Regarding your first question, minimum balances vary by credit card issuer and each card's terms. The minimum payment is 2-4 percent of the balance due customarily. I can find no law setting a minimum amount due. If you have two accounts, then the account with $1,000 will have a $50 minimum payment if your contract states you must pay a minimum of 5 percent. Your account with $2,000 due will have a $100 minimum payment. However, the credit card issuer may require that all minimum payments on certain cards be $X for balances greater than $Y. Therefore, to learn your minimum payment for each account, look at the contract you signed with that credit card issuer.

The Credit CARD Act of 2009 required that credit card issuers place plain and simple minimum payment information on credit card statements. The minimum payment disclosures I have seen are printed on the backs of monthly statements. Look to your monthly statements to learn more about your minimum payments.

Paying more than minimum payments

You seem to be referencing what was added to Section 164 of the Truth in Lending Act (15 U.S.C. 1666c). If my assumption is correct, allow me to quote the relevant section in its entirety:

"(b) Application of payments.

"(1) In general. Upon receipt of a payment from a cardholder, the card issuer shall apply amounts in excess of the minimum payment amount first to the card balance bearing the highest rate of interest, and then to each successive balance bearing the next highest rate of interest, until the payment is exhausted.

"(2) Clarification relating to certain deferred interest arrangements. A creditor shall allocate the entire amount paid by the consumer in excess of the minimum payment amount to a balance on which interest is deferred during the last 2 billing cycles immediately preceding the expiration of the period during which interest is deferred.

"(c) Changes by card issuer. If a card issuer makes a material change in the mailing address, office, or procedures for handling cardholder payments, and such change causes a material delay in the crediting of a cardholder payment made during the 60-day period following the date on which such change took effect, the card issuer may not impose any late fee or finance charge for a late payment on the credit card account to which such payment was credited."

The law requires that card payments must be applied to the debt with the highest interest rate first, which is usually debt accrued on cash advances. The minimum payment will still apply to pay off the lowest interest rate. But any amount more than the minimum payment will be applied to the highest interest debt.

To learn more about the new additions to the Truth in Lending Act, see the Bills.com resource Credit CARD Act of 2009.

I hope this information helps you Find. Learn & Save.

Best,

Bill

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