Credit card payment allocation confusing


Credit card payment allocationCustomers remain confused over the complex issue of credit card order of payments, although public knowledge on the issue has improved slightly since 2007.

A poll from building society Nationwide suggests that 63% of customers do not know the order in which their credit card payments are allocated, compared with the 69% who said the same two years ago.

Credit card balances can consist of several different debts, all charged at varying rates of interest. For example, a low-interest balance transfer debt can be added to a high-interest purchase or ATM withdrawal to make a balance total. Providers' policies vary on which order these debts are paid when a customer makes a repayment.

Balances are often paid off faster for customers of those firms whose policies prioritise the higher-interest debts and vice versa.

Nationwide's product and marketing director, Chris Rhodes, commented: "Our research results are unequivocal: Consumers still don't understand this issue and continue to be penalised. This is a fairness issue and a positive order of payments [ie, paying off the most expensive debt first] is now the fairest way forward for consumers."

Reflecting public concern on the issue, the government imposed new order of payments rules on credit card firms in October 2008.

Providers are now required to make their payments policy clear on customer statements.ADNFCR-2308-ID-19511300-ADNFCR

Published: 15 December 2009