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Credit card companies make extra GBP 500 million, says Nationwide

Thu, 08 Jun 2006

Many credit card companies make an extra £500 million a year by paying off cheapest debts first, according to experts.

Nationwide claims that many credit card deals, such as 0% credit cards and balance transfer cards, leave balances on higher interest items like purchases and cash advances, to continue to accrue interest.

The company, which also provides internet banking, health insurance, investments, personal loans and savings, has stated it is the only major credit card provider not to do this.

Furthermore, customers could save over £100 a year in interest by switching to Nationwide, the company has said.

Stuart Bernau, of Nationwide, commented: "Many credit card providers use low introductory rates to lure people into opening an account.

"These offers can look very appealing, but when you scratch beneath the surface you discover that credit card holders often don’t receive the full benefit of these low rates.

"Most providers apply repayments to the cheapest debt first making it more expensive for you and more profitable for them."

Recent research from credit card provider Morgan Stanley shows that more UK credit cards are being used for everyday purchases, such as shopping and payment of bills.

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