You are here: Home - Credit Cards & Loans -

Customers lose out to payment order

0
Written by:
13/02/2008

Major UK credit card providers offering 0% on balance transfers cost their customers more money by splitting repayments unevenly, Moneysupermarket has revealed.

The price comparison website found RBS, Barclaycard, MBNA, HBOS, HSBC, Lloyds TSB, Capital One and Egg use their customers’ monthly repayments to clear the cheapest debts first, racking up more interest for the consumer.

According to Moneysupermarket, if a customer of one of the providers mentioned above transfers a balance of £2,000 balance transfer at 0% and then spends another £1,000 on their new card, a repayment of £2,500, would mean the remaining £500 balance would still accrue interest at the typical APR – usually around 15.9% – rather than continuing at the 0% rate.

Steve Willey, head of credit cards at Moneysupermarket, said: “Credit card providers are quick off the mark to attract customers with 0% deals but they are much slower when it comes to educating people on what that 0% actually means.

“Balances are being split without consumers realising. Many cardholders paying the minimum balance each month are being stung because their money is only paying off the cheapest debt. This is why a 0% balance transfer card isn’t a good thing to spend on.”

Nationwide, however, goes against the grain by using customers’ repayments to clear the most expensive debt first. Jeremy Wood, director for credit cards and banking at Nationwide, said: “I am pleased Moneysupermarket has recognised the importance and impact of the order of payments credit card providers use. An adverse allocation of payments costs consumers £500 million in unnecessary interest charges each year – charges that customers can ill afford to pay. It’s essential consumers understand the differences between the credit cards available when it comes to making a decision about which card to choose.”

Related Posts

Tagged:

Tag Box

Debt

Pension

Spending

Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
Savers benefit from higher rates

Savings rates are currently much higher than a year ago, even though the Base Rate was at the same level...

Close