Ignorance 'costs credit card customers £500m'

Ignorance and apathy about the order of credit card repayments cost Brits £500 million a year, according to new research.

The study, conducted by Nationwide: Nationwide
, revealed that 69 per cent of credit card customers are unaware of the order in which their repayments are made.

Most companies, though not N Nationwide: Nationwide
, operate an adverse order of repayments whereby customers pay off the cheapest debt first, leaving debt with higher rate to accumulate interest until they can clear their whole balance.

Only 29 per cent were aware of the order of payments, with 26 per cent saying simply that they didn’t know and 18 per cent mistakenly believing that the oldest debt was repaid first.

Worryingly 12 per cent said they thought that credit with the highest interest was paid off, the exact opposite of the adverse order of repayments.

The ignorance, if not the customers’ apathy, will be remedied when new rules come into force later this year.

From October 1st 2008 providers will have to make a clear and obvious statement of the order of repayments they use, following a Department of Trade ruling.