How your payments are applied

The order your payment goes to interest, fees, past-due amounts and principal — and why your balance may barely move.

A payment is rarely applied all to one thing. The order depends on what kind of account you have, and it is set out in your agreement.

If you have an installment contract or loan

This covers retail installment contracts and bank or credit union installment loans — a fixed amount over a fixed term.

1. Interest first
2. Then any unpaid fees
3. Then your outstanding principal

That is why a payment early in the term moves your balance less than you might expect: more of it is interest, and less is principal. As the balance falls, the interest portion falls with it and more of each payment reaches principal.

You can see the split for every payment you have made — see Your transaction history, which shows Principal Pd and Interest Pd for each one.

A late fee will not trigger another late fee. If a payment is short only because of a late fee charged on an earlier payment, and the current payment is otherwise paid in full, another late fee is not added on top.

If you have a revolving account

Purchases are added as charge slips against an overall balance, and the order has more steps.

1. Outstanding finance charges, fees, and any past-due amounts
2. Then your minimum monthly payment, and anything above it, goes first to promotional balances — soonest to expire first
3. Then to interest-bearing balances, highest rate first

Two things follow from that second step, and both matter:

Extra payments go to your promotions before anything else. If you are trying to clear a promotional balance before its expiration date, paying more than your minimum sends the extra where you want it.

If you have more than one promotion, the one expiring soonest is paid first. You cannot choose a different order.

See Promotional offers.

If you have a student loan

Payments are applied on the date they are received, and interest is simple rather than compounded.

During an in-school period, a payment above the interest owed puts the excess toward principal; a payment below it does not add the shortfall to your principal. See Student loans.

If you pay more than your monthly payment

There is never a penalty for paying extra or paying early. What the extra does depends on how your account is set up, and the two behaviors are different enough to matter:

Setup	What happens when you pay extra
Your due date stays where it is	The extra goes to your principal, and your next payment is due as normal
Your due date moves forward	The extra is counted as future payments. Pay $300 against a$100 monthly payment and your next due date moves out two months

The second one catches people out. Your balance still comes down, but if you assumed you had also made this month’s payment and put money toward principal, only one of those happened.

You can ask for it to work the other way. If your extra payments are moving your due date and you would rather they reduced your principal — or the reverse — tell us and we will set your account up that way. It is a support request, not something you can change on the payment screen.

If you are paying extra to clear a promotional balance before its deadline, check your transaction history after the first one to confirm the money went where you intended.

Your own agreement governs

The orders above are how these products generally work. Some agreements — particularly credit union loans — reserve broader discretion over how payments are applied.

Your agreement is the authority. You can view your copy in uPortal360 under Agreement Details.