To make sure you’re using your credit card as effectively as possible, it’s a good idea to understand how your repayments are applied to any money owing.
It’s ideal to pay your statement closing balance in full. If you do this, you don’t need to worry about where the repayment goes first.
If you’re not able to pay the statement balance in full, your repayment will be allocated to part of your balance.
What kinds of transactions make up your balance?
Your credit card balance may be made up of transactions such as purchases, cash advances and balance transfers. Each of these may attract a different interest rate. So, where does your repayment go to first?
1. Debt with the highest interest rate
Credit providers in Australia, such as CommBank, apply your repayment to the debt with the highest interest rate (as at the statement date) first – unless you have made an agreement otherwise. This enables you to save money on interest charged by helping you reduce the debt with the highest interest rate first.
Some credit providers may have a different repayment arrangement for credit card accounts opened before 1 July 2012.
2. All other debt
Once the debt with the highest interest rate is repaid, repayments are then applied to the next highest interest rate from the statement period.