Manage Multiple Balances on One Credit Card

Traditionally, the expectation is to have one interest rate that impacts the credit balance on a credit card month-to-month. 

But it is possible to carry multiple balances with different interest rates on the same card. When this happens, it is very easy to forget which balance is being paid down and mismanage payments.  

What should you do if you have multiple balances on your card, and how does this happen in the first place? 

How can you have multiple balances on the same card? 

If you make purchases that have different interest rate charges, you can end up with multiple balances on the same card.  

For example, you purchased a dress worth $200, and the interest rate charged for purchases made through the card is 20%.  

Next, you used your card to withdraw $500 from an ATM. The interest rate on the cash advances stands at 30%.  

Then, you went a bit overboard and bought a washing machine worth $2,000 using the same card.   

The store made you “an offer you couldn’t refuse” – no interest for 12 months if you pay off the entire amount within that time period. If you have a balance left after 12 months, you would need to pay interest at26% on the whole amount right from the day of purchase.   

Due to the charges made on your card, you know have a purchase balance, a cash advance balance, and a deferred interest balance- all at different rates on the same card. 

Payment Becomes Tricky 

When you make a payment on a card with multiple balances at different interest rates, it isn't as straightforward as a regular payment. 

For example, you pay down $500 on the card, while the minimum payment amount was $150, you would want the payment to go towards reducing the higher interest balances.  

But the Credit Card Act of 2009 states that the issuer can apply the minimum payment amount to any balance, the excess payment must go towards reducing higher-interest balances. 

The excess payment must be applied to balances in descending order of interest rates. 

As for deferred interest promotions, during the last two billing cycles, before the promotional period expires, the issuer must apply excess payments towards that balance, regardless of the interest rate. Instead, that $500 payment is being distributed, $150 is going to go towards reducing the $200 purchase balance.  

Now, $350 of the payment amount remains – this will be used to cover the cash advance balance. 

After the monthly payment, you’ll be left with $50 of the purchase balance, $150 of the cash advance balance, and $2,000 of the deferred interest balance.  

If this payment is made during the last 2 billing cycles before the deferred interest promotional offer ends, then the entire $350 of excess payments would go towards reducing that balance. 

The balances after the monthly payment would be $50 off the purchase balance, $500 of the cash advance balance, and $1,650 of the deferred interest balance. 

Unless you pay more than the minimum, your higher interest rate balances are going to balloon up with finance charges. 

In other words, if you consistently pay the minimum due, then you may land up in a debt trap.  

How to Pay down Debt with Multiple Balances on One Card 

Always pay more than the minimum on your credit card and pay down as much debt as you can until you no longer have any debt with multiple balances on one card.  

Avoid mixing balances with different rates on the same card by avoiding cash advances or making deferred interest purchases. 

Instead, you could use a different card with lower interest rates to make any other necessary credit purchases. 

Balance Transfer 

What if you’re already stuck in a situation where you have multiple balances on the same card?  

Shift some of the debt on another balance transfer card – that would give you some time to pay off the debt without accumulating more interest. 

When your deferred interest offer is due, request the issuer to allocate excess payments to that balance.  

Whether the card company validates your request or not is at their discretion, but there’s no harm in trying! 

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At Fund&Grow, we utilize creative credit card financing in such a way that we can help clients with good credit obtain as much as $250,000 of unsecured credit at 0% for a period of 6, 12, or 18 months. 

This amount can be used for any purpose – from financing a small business to providing a down payment on a property - no questions asked. 

So, if you need these kinds of funds, call us at (800) 996-0270, and we will help you right away.