Order of repayment costs credit card consumers

Wed, 10 Oct 2007

Numerous credit card customers may be paying over the odds to service their debt due to the order of repayment that their bank or credit card provider employs. Fresh research reveals that over 75 per cent of credit card companies strictly apply order of payment rules.

The research, by MoneyExpert.com, is rooted in the fact that many providers charge different rates of interest depending on the different forms of borrowing. In order to pay off more expensive borrowing, customers have to first clear cheap debt – this is known as order of repayment.

The research indicates that the two most expensive types of borrowing – cash withdrawal and purchases – are often the last two to be cleared. The chief executive of the site, Sean Gardner, reportedly commented: "If you're unaware of the order of payments on your card, it's definitely worth checking. Particularly if you're keen to buy something but have already used your card for a hefty balance transfer. As with all credit card deals you need to check that the card you're using is suited to your requirements. If you do want to use your card for cash withdrawals or purchases there are some cards that'll help you pay those off first to help you avoid prolonging the interest incurred. But those are few and far between."
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