Credit cards: Different Balance Amounts and Different Interest Rates on The Same Account

We all know that we have to be cautious when we use our credit cards. Here is some more information so you can be more informed and be able to balance your finances.
Banks charge different interest rates (depending on the transaction type) on separate amounts of your total balance in a credit card.

Lets say that you bought something for $500 with your credit card with a special rate of 3%. Later you decided that you could lower your payments on another credit card so you transferred $5000 from another high interest rate credit card to this card with a special interest rate at 4%. Later you decide to buy something else for $1000 but at your normal interest rate on your card of 8%.

With the example above, when you make your monthly payments, the balance with the lowest interest ($500 at 3%) will be paid off first. Until you pay off the balance with the lowest interest ($500 at 3%), all other balances ($5000 & $1000) in this same card will still accumulate interest each month. Once the lowest interest rate amount is paid off you continue to pay off the next one ($5000 at 4%), meanwhile the balance of $1000 at 8% is still accumulating interest.

You can see with this example that paying off a balance of $5000 might take some time to pay off meanwhile you keep accumulating more interest on the other balance with higher interest rates.

Most of us know that if we don’t make our payments on time, the bank can raise the interest rate, well most don’t know that if you are late with payments on one account, other banks that you have credit with can also raise their interest rates even though the late payment was not made to them.

I hope this can be of some help to someone.