30 August 2007
Nationwide Building Society today commented on the issue of hidden costs related to the order in which credit card repayments are made. The practice, known as Order of payments (OOPs), which is the sequence in which credit card bills are paid, has attracted criticism, with some card providers paying off the cheapest debt first, leaving the most expensive debts to accrue interest.
Research* by the building society found over two-thirds of people (69%) did not know in which order their credit card payments were allocated to their account. 18% of people incorrectly stated that the longest outstanding debt is paid off first, while 12% of people believed that items with the highest interest are paid of first.
While over a quarter of people simply did not know what order their credit card bills are paid off, 9% of people thought they get to choose which items were paid off first, while 4% believe the most recent purchases are dealt with first.
"Nationwide has long-campaigned for a positive order of payments for all credit card customers as an adverse order of payments costs consumers £500 million every year," Jeremy Wood, Divisional Director for banking and credit cards at Nationwide, said.
He added: "With a complex issue such as order of payments, providers have a duty to explain clearly to consumers how the way payments are allocated impacts on their efforts to decrease their credit card debt."
* Research conducted among a random sample of 1,000 respondents by phone, by Marketing Sciences June 2007
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