Nationwide Building Society has urged credit card companies to inform their customers clearly how they allocate their repayments, rather than be forced by regulation. In just six months time, all credit card providers will be obliged to include on statements details of the order of payments they use.
Nationwide Building Society (NBS) estimates that consumers will have paid up to GBP500 million in interest payments, in the 12 months since it was announced that providers will have to highlight the order of payments they use.
NBS has campaigned for many years to bring about change in the industry and increase transparency on credit cards. NBS welcomed the announcement made in April 2007 by the Department for Business, Enterprise and Regulatory Reform (BERR) requiring providers to display a message on every credit card statement, highlighting how payments are allocated, from October 2008.
Unlike NBS, almost all credit card providers allocate cardholders’ payments to the cheapest debt first, allowing the more expensive transactions to continue to accrue interest – increasing the cost the consumer has to pay.
As people try to spring clean their finances and look to credit cards with 0% balance transfer deals to help manage their debt, many will find that, if they make a purchase, they won’t be able to clear the cost of the purchase until the balance transfer has been paid off in full. This practice is not well understood by consumers and is not in their interests. The new banking code highlights the importance of providing consumers with clearer information about products.
Jeremy Wood, divisional director of NBS, said: When BERR made their announcement over a year ago, we hoped credit card providers would do the decent thing and clearly tell their customers how their payments are allocated on their statements.