Why can't I pay my expensive debt first?

Most of the credit cards will not allow you to pay the expensive debt. They make your financial difficult times even harder by employing a practice what they call Negative Payment Hierarchy.

What it means is that if you have card with two rates, say 10% and 20%, any payments that would go to your card will clear of (surprise surprise) 10% debt. One may expect that that the expensive debt should have been cleared instead of cheap debt. However, card companies wish to suck every drop of our blood!

How do we fall in to this trap?

The cards normally have introductory offers such as 0% balance transfers. So use the card for balance transfer, well and good. However, if you use the card for purchases (which may have different APR), or cash withdrawals you are fallen into the trap.

The purchased amount cannot be cleared until your balance transfer amount is cleared off. That is, the interest on the card accrues on the purchased amount (or cash amount) while your monthly payments are clearing off the 0% debt, s..l..o..w..l..y.

Many are unaware of this fact - so am I until few months back. I never read the small print - a dearly costing lesson.

Exception to this practice is followed by Nationwide and Saga - they follow Positive Payment Hierarchy.