30 October 2007
UK credit card holders could be paying an extra £500 million in interest each year thanks to a lack of clarity on their bills, Nationwide said yesterday.
The order of payments taken by providers is a controversial topic with consumers - with many paying off smaller transactions first and leaving more expensive purchases and payments to accrue extra interest.
As a result, the Department for Business, Enterprise and Regulatory Reform (BERR) has introduced new legislation, which requires credit card providers to highlight order of payments on bills to enhance clarity for customers - although this measure does not come into effect for another 12 months.
Nationwide Director, Jeremy Wood, said: "Most providers apply payments to the cheapest debt first making it more expensive for the consumer and more profitable for themselves.
"What seems like a good deal at first can become unnecessarily costly for cardholders unless they clear their balance in full."
He added: "We welcome the move by the BERR to help gain more clarity for consumers, by displaying a message explaining the order of payments, but we call on the industry to do the right thing for consumers and implement the change now, rather than wait until the October 2008 deadline."
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