Positive Payment Hierarchy Explained

Positive Payment Hierarchy Explained

Millions of people use credit cards and cash converters log book loans on a regular basis. They are a really popular money management tool. One of the main ways they can help you understand Positive Payment Hierarchy is with an interest free credit card. Most of the credit card offers you the chance to make purchases without being charged the standard interest rate. But what about those credit cards that do require you to pay interest? How do they work?

Positive Payment Hierarchy

Well, you are probably aware about minimum monthly payment. When you receive your bill, you are required to make at least a minimum monthly payment on your credit cards.

Alternatively, you can pay back the whole amount in one go. Many people like the flexibility offered by the minimum payment option. Minimum payment options means they can spread their payments out over a longer period. The minimum payment system manage money more closely.

When you make the minimum monthly payment, this will generally use something called the positive payment hierarchy. It is designed to help you minimize the amount of interest you have to pay on your purchases overall.

For instance, if you buy two items using a credit card in a single month, those two items might be charged at different levels of interest.

Payment Hierarchy

Minimize Interest payments

In order to minimize your interest payments, your credit card provider would then use the money from your minimum monthly payment to pay off the item with the higher rate of interest first, so you ultimately pay less in the long run.

 This helps to keep the costs associated with credit cards down and it is also good if you are being careful with your money and are budgeting carefully.

Essentially, positive payment hierarchy is a concept that sounds confusing but actually benefits you as a consumer, so it is worth looking out for credit cards that offer this as a feature so you can be sure of getting the most from your card.

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