The M&S credit card allocation of payments

The news that credit card users are unaware about the allocation of payments got me thinking.

Only last month I noticed that my M&S credit card statement said this “If you do not pay off the full amount outstanding, we will allocate your payment to the outstanding balance in a specific order, which is set out on the reverse of this statement”.

This is what was on the back of the statement:

We will apply payments we receive to your account in the following order

  1. Interest, insurance premiums, fees and charges
  2. Balance transfers
  3. Purchases (other than qualifying furniture purchases)
  4. Cash advances
  5. Qualifying furniture purchases

I have no idea what a “qualifying furniture purchase” is, however it will cost you the most in interest payments because your payments are allocated to it last.

Note, too, that cash advances are near the end of the list.  This means that you will be paying a high charge for borrowing cash using the M&S credit card.

Interest charges are paid off first, as are other charges, which is good.

So kudos to M&S for making their payment allocations clear and transparent (other than the mysterious qualifying furniture purchases), but what a warning this is to credit card users generally.

You must be aware of the real cost of not paying off your credit card in full every month.

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