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Thank you for replying to my query. The $218 I paid (on he same day within an hour of the mistaken withdrawal) was not a payment on my card. My card had already been paid for that month. In fact, I overpaid my account. The next month I overpaid my account to the tune of $1,000 and was still being charged interest on the cash withdrawal of $218. And, I must say, I don't care what the practices of other financial institutions are. USAA is my bank and I have always had a wonderful relationship with them. USAA has always been different, and the day that changes is the day I take my business elsewhere.
i have spoken over the phone to a bank representative. We had a great conversation. This is the question I would like asked by the powers that be: iF it is possible to separate interest on purchases from interest on cash withdrawals as far as interest charges go, then there should be a way to pay them off separately, without incurring all that interest. It's being passed up the line for discussion.
Almost without fail at every bank in the world credit card payments are split up to pay in order:
1) Past due amonuts
2) Current minimum payment
3) balance with the highest interest rate
This is the way that USAA Master Card operates (and I must assume all its other cards), Here is the disclosure. (see the top of page 15 for the order in which payments are credited).
So as an example if your balance is $1000, your minimum payment is $50 and you have the cash withdrawal of $200 which has the highest interest rate your payment would be broken down this way:
$50 to minimum
$150 to cash withdrawal
So you would still have $50 of the cash withdrawal hanging around accruing that high interest rate.
If they didn't apply the payment in this way let them know and they'll fix it. Check your specific disclosure for your card, but I bet they're all the same. Minimum and then anything above that goes to highest rate first.
That seems only fair, if they applied it to the lowest rate you'd be paying interest on the high balance for a long time if you only made the minimum payments.