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Credit Card Payments soon to be Divided among Balances

Many consumers find it difficult to stay on task when it comes to making credit card payments (which can result in late fees, missed payments, and bad credit scores). This is particularly true when dealing with more than one balance. The Credit Card Reform Act is set to change this in July 2010, and in the long run consumers should benefit in a number of different ways.

Generally speaking, this section of the act states that a credit card company must fairly apply payments made by the consumer to balances with different interest rates. In turn, this works out for the consumer because credit card companies will no longer be able to leave high interest debt in place while dealing with lower rates that earn them less money.

There are two ways in which credit card companies can apply payments that are in excess of the minimum requirement:

1. The entire payment can be applied to the balance with the highest APR. Again, this helps the consumer pay down high interest debt above all else without the lender having a say on where the money goes.

2. The payment can be split proportionally among the balances. This is known as the pro rata rule.

As a consumer who makes regular credit card payments you may never have given the above information a second thought. And while there may not be much you can do right now, when the Credit Card Reform Act goes into place in July 2010 you will be more protected than ever before. 

Soon enough, any payment you make over the minimum will be divided among balances with different rates, if available. This may not sound like a big deal but it is sure to work in your favor if you are carrying more than one balance with different interest rates. 

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