8 June 2006
It has been revealed that credit card providers make an extra £500 a year from the way they allocate payments.
Most UK card providers allocate payments first to outstanding balances at the lowest rate of interest, leaving balances at higher rates of interest, such as purchases and cash advances, so that they continue to accrue interest.
Nationwide is urging customers to avoid credit card providers who do this and is also launching an advertising campaign to raise awareness of the practice.
It applies payments to the most expensive debt first for all its credit card customers, saving consumers over £100 a year in interest.
"Many credit card providers use low introductory rates to lure people into opening an account," said Nationwide executive director, Stuart Bernau.
"These offers can look very appealing, but when you scratch beneath the surface you discover that credit card holders often don't receive the full benefit of these low rates. Most providers apply repayments to the cheapest debt first making it more expensive for you and more profitable for them. We call on the industry to play fair by consumers and apply repayments to the most expensive debt first."
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