Credit card companies to list order of repayments on customers' statements

There are many ways in which credit card companies make extra cash off their customers, and one of these is known as adverse credit card repayment order, which basically refers to the order in which consumers repay their debt, determined by the credit card issuer.

Many credit card companies apply repayments made by consumers to the lower interest debts first, which leaves higher interest debts on the account to continue accruing interest – this is regardless of the order in which the transactions were made.

The government has announced that it now plans to crackdown on the practise of adverse credit card repayments, claiming that credit card companies are making an estimated £500 million each year by using such tactics. Under new government rulings credit card companies will have to be more explicit with regards to the way in which consumers' repayments are disbursed on their accounts. The way that many of these credit card companies disburse repayments means that customers end up paying far more in interest.

Based on the new ruling by the Department of Trade and Industry, credit card companies will have to start listing the order of repayments that are being made on a customer's account on their statement, and this will be listed by the balance. This is due to commence from 1st October 2008.

A campaign had been started by Nationwide urging authorities to ensure that a warning to be added to the statements of credit card companies that use this sort of repayment structure.

One Nationwide spokesperson stated: "Many credit card providers use low introductory rates to lure people into opening an account. Most providers apply repayments to the cheapest debt first making it more expensive for you and more profitable for them."

Tom Smith
6th May 2007