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A Costly Loophole In the Credit CARD Act

The Credit Card Accountability, Responsibility and Disclosure Act banned many of the industry’s most abusive fees and practices when it went into effect last winter.

But there’s a loophole in the new regulations that really bugs us.

The new regulations have left many wondering how their payments are being credited.In the past, credit cards routinely applied payments to that portion of your balance that charged the lowest interest rate.

The Credit CARD Act was widely praised for reversing that and forcing credit cards to apply payments to the most expensive debt first.

But the new regulations don’t really go that far.

The Act still allows credit cards to apply your minimum payment to the lowest cost debt first. They only have to apply amounts in excess of your minimum payment to your high-cost debt.

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