Paying Off Higher-Interest Rate Debt First

The new CARD Act rules don't apply to everybody, it turns out.

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Dear Alpha Consumer,

Recently, I tried to pay off some of my credit card debt but my credit card issuer said that I wasn’t allowed to pay off the higher interest rate debt first. (I have about $14,000 from purchases at a 9 percent rate and $41,000 from cash advances at a 20 percent rate.) Are they allowed to do that? Also, if it makes a difference, the card is a business account.

—In Debt and Frustrated

At first glance, I thought your credit card issuer was clearly in the wrong, since the new credit card regulations require payments above and beyond the minimum payments to be applied to the higher interest rate debt. But the key to your problem, it turns out, lies in the fact that you have a business account, not a regular, personal account.

According to Tim Chen of, business cards are exempt from the CARD Act regulations, and card issuers have been taking advantage of that fact. Some have even been accused of pushing business accounts (sometimes called “professional credit cards”) onto unsuspecting customers. If you were improperly issued a business credit card, then you might be able to get that corrected.

A recent study by examined the impact of the business account exception, and found that some card issuers apply the CARD Act to those accounts even though they are not legally required to do so. The study found that Bank of America and Capital One both apply some of the protections to their business accounts. (You can see the complete results of the study here.)

The bottom line is that you don’t have much recourse for getting your higher interest debt paid off first, unless you were improperly issued a business account.

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