Credit card customers 'unaware of order of repayment'
Published On 30 August 2007
The majority of credit card customers in the UK do not know in what order they pay their debts, new research reveals.Data from Nationwide shows that 69 per cent of consumers did not know the correct order of payment on their credit cards.
One in five (18 per cent) incorrectly believed that the longest outstanding debt is paid off first. Another 12 per cent thought that items with the highest interest rate are cleared.
Worryingly, nine per cent thought they could choose which debt they paid back first and four per cent claimed the most recent items are the first to be dealt with.
Jeremy Wood, divisional director for banking and credit cards at Nationwide, commented: "Most providers apply repayments to the cheapest debt first making it unknowingly more expensive for consumers but more profitable for the credit card providers.
"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."
Figures from the British Bankers' Association (BBA) show that credit card borrowing dropped by £100 million in July.
