Millions of credit card users expect the higher interest rate balances to be paid off first, however this is not always the case, new research has found.
Although most credit card holders expect the highest interest rate charges to be paid off first if they make a part or minimum payment against their monthly statement, most credit card providers allocate this to the lowest interest rate charges first, rather than the higher interest rate charges.
However, despite the best efforts of the industry to raise awareness of the way credit cards work, millions of customers continue to be unaware that this is not necessarily the case with most lenders.
This will change in January 2011 when all credit card providers will be required to allocate payments to the highest interest rate charges first.
The reversal in what is known as ‘allocation of payment’ practice could benefit the 40% of credit card users – approximately 12.1 million adults in the UK – who do not usually pay off their full credit card bill every month.
MBNA have already implemented the practice of paying off the highest interest bearing charges first, as John Greaves from MBNA explains in this video: