Order of payment refers to the way your credit card repayments are made read our guide to learn more
You might not have heard the term ‘order of payment’ – but if you’ve got a credit card it can make a big impact on how much interest you end up paying.
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What is order of payment?
It used to be the case that lenders could decide in what order your different kinds of credit card borrowing were repaid.
Many lenders had an order of payment which meant that cheaper borrowing had to be repaid before you could start to pay off more expensive debt.
What difference does order of payment make to me?
Order of payment can make a big difference to how much interest you have to pay on your credit card borrowing.
If you have borrowed in more than one way on your credit card, for example if you transferred a balance to take advantage of a low rate APR or 0% balance transfer deal, and then also made purchases, or a cash withdrawal you will probably be paying different APRs on all these kinds of borrowing.
With a negative order of payment, you had to pay off the debt with the lowest APR first – meaning that the more expensive borrowing racked up more and more interest while you were waiting to be able to repay it.
However, with positive order of payment, you will be able to pay off your more expensive borrowing first – which could save you money in credit card interest.