Thursday 1st November 2007
Consumers may not realise that their credit card provider pays off the cheapest part of their balance first, Nationwide claims.
The financial services provider asserts that most lenders leave the part of the balance which incurs the most interest until last.
Director Jeremy Wood comments: "Most providers apply payments to the cheapest debt first making it more expensive for the consumer and more profitable for themselves.
"What seems like a good deal at first can become unnecessarily costly for cardholders unless they clear their balance in full."
One method of limiting the amount incurred in interest charges is to take advantage of an interest-free balance transfer.
But this could be increasingly difficult in the wake of the recent credit crunch, according to Barclays.
Figures published in Citywire from the financial services group suggest that up to half of all credit card applications are currently being rejected.
As a result, Britons who have avoided the effects of the interest rate rises over the past 18 months might find their luck has run out.
Prepaid cards could be a means of avoiding future interest charges for consumers concerned about their ability to repay such borrowing in the coming months.
Research conducted by Mastercard Europe predicts that the UK is to become the largest single market for prepaid cards in the continent by 2010.
Chris Reddish, head of prepaid products at the firm, asserts that the findings indicate "the fact that consumers, issuers and public sector bodies are recognising the benefits provided by this form of payment".
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