Credit cards Updated:
Customer's credit card repayments should be used to pay off higher rate balances first to reduce the amount of interest they pay, it has been suggested. Currently, almost all UK credit card providers allocate the payments they receive to pay off the cheapest debt first and the most expensive debt last. This means balances at higher interest rates, such as purchases and cash advances, are paid off last and continue to build up interest. Consumers who can least afford to be affected are hit the hardest, as higher interest debt remains on the account for longer. New rules to be introduced in the US in just over a year's time will see this practice banned, and Nationwide BS believes it is a change that should be adopted in the UK too. According to the Society, customers could save up to £213 in the first year alone by taking a card that allocates payments in a positive way. "Consumers can ill-afford to lose this much money, especially in the current financial climate," said Jeremy Wood, consumer finance director. "We feel it is time for the Government to intervene and introduce regulation to benefit those affected. "In the meantime, credit cardholders should look at how their card provider allocates payments. They could certainly save money by switching to a provider, like Nationwide, which pays off the most expensive credit cards debt first."
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