Dear Clever Credit,
What gets paid off first — regular balance or pay over time?
I use Chase and have noticed lots of cards are offering to split big purchases into monthly payments that are less than your regular interest rate, in exchange for a fixed fee. If I pay more than that and my minimum payment, does that money go to my regular balance or Pay Over Time?
Signed,
Chasing Payments
Dear Chasing,
I don’t have a Chase card, so I had to do a little digging with this one, since I’ve only used American Express Plan It, its pay over time feature. With Chase Pay Over Time, you can break up large purchases into more manageable monthly payments. There’s no interest for this purchase once it’s on a plan, just a fixed monthly fee.
For this scenario, let’s focus on your “Interest Saving Balance” amount. This is what you need to pay in order to avoid interest on new purchases.
Let’s say you have a statement balance of $2,000 — an outstanding balance of $300, plus $200 in new purchases and a $1,500 Chase Pay Over Time plan balance. Plan durations range from three to 24 months, so for this math problem, let’s say you have a plan of 12 months, splitting your payments into $125 installments (not including any additional monthly fees).
[Read: 0% Introductory APR Credit Cards]
So your statement balance would be $2,000, but your Interest Saving Balance amount would be $325, plus the minimum amount owed on your outstanding balance of $300. This is because the Interest Saving Balance will include your previous account balance (in this case, the minimum amount due), new account activity (the $200) and your Pay Over Time plan monthly payment due ($125).
By paying your Interest Saving Balance amount, you’ll avoid paying interest on that $200, but not the $300 since it was already part of your outstanding balance. But whatever your total Interest Saving Balance amount is will include the minimum amount owed on that outstanding balance. And any charges made after the cycle closes will be added to next month’s Interest Saving Balance amount.
So if you pay your Interest Saving Balance every month instead of your minimum payment, you won’t be charged interest on new purchases for the lifespan of your Pay Over Time plan.
And if you want to pay more than the Interest Saving Balance, that extra money will go to your Pay Over Time balance, not your outstanding balance, Chase confirms. So you can pay off your Pay Over Time balance earlier than scheduled, but you won’t avoid continuing to pay interest on the outstanding balance.
[Read: Best Credit Cards.]
(Little hack I found when I called Chase: If you need to speak to a live agent but are having trouble securing one, press the pound key repeatedly until the menu options change. From there, you’ll be able to select “credit cards” and immediately be directed to a real person.)
I recommend pulling back on your spending if you go this route, though. Things can quickly get muddled if you continue spending as usual on your credit card while having an open Pay Over Time plan.
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Clever Credit: I Have a Chase Pay Over Time Plan. What Balance Should I Pay First? originally appeared on usnews.com
