When the legal advisors in the government wanted to bring about a change in the credit card industry, they came up with the plan of allocating a part of the payment you make towards the card with the lowest interest rate. While this did indeed bring down the debt on the 0 interest credit card balance transfers, the banks made up for this by levying high rate of interest for cash advances made on the credit card.
The most recent news from the Capitol Hill indicated that the government is trying to bring about changes that can prove to be in the favor of the consumers. The law makers in the government told that as long as the payments were being made on time, the debt on the card with the higher interest rate would come down. The CARD Act that came into play from February this year was intended to help find a middle ground for the banks as well as the consumers.
However, as things stand now, both parties are not really thrilled about the Act. With the implementation of this Act, one the amount that paid in addition to the minimum due on your card will be allocated to the card with the higher interest rate. If you don't pay this extra amount, you will only paying a part of your interest charges or no interest charges at all.
How is your payment allocated?
The credit card act that has been implemented is trying to balance the profit margins of the credit card institutions and the promises that are made by the candidates during the period of elections. Though they did assure you of helping you save money in your pocket, they didn't tell you how much. The CARD Act will only help you save a miniscule amount which might not be able to make a big difference in your monthly expenditure and income.
Let us assume that you have a $5000 balance on your credit card. Let us further consider that $2500 (about 50% of the amount) is because of the 0 interest balance transfer you opted for and the other 50% is the expenditure incurred by you on your most recent holiday which comes under the normal APR. The best way to clear off this debt is by making payments which are more than the minimum amount needed. It is only the money paid over and above the minimums that will be allocated towards the balance that incurs a high rate of interest.