Oops! Consumers could save up to £213 a year

Nationwide urges the Government to follow the U.S. and make positive order of payments compulsory.

In just over a year's time, credit card providers in the U.S. will need to allocate customers' payments to higher rate balances first, therefore reducing interest payments. This comes after the US Federal Reserve Board proposed a number of new rules to prevent unfair practices on credit cards. In light of this, Nationwide Building Society believes this regulation should be mirrored for UK card providers. The Society reveals that customers could save up to £213 in the first year, by taking a card that allocates payments in a positive way.

Currently, almost all credit card providers in the UK allocate payments in an adverse way and pay off the cheapest debt first and the most expensive debt last, leaving balances at higher interest rates, such as purchases and cash advances, to continue to accrue interest. Consumers who can least afford to be affected are hit hardest by this unfair practice, as higher interest debt remains on the account for longer.

The problem is compounded further because many providers use low introductory rates to lure people into opening accounts. These offers can look very appealing but, on closer inspection, consumers may discover they do not receive the full benefit of the low rates. Nationwide always allocates payments received from its credit cardholders in a way that is favourable to them, by paying off the most expensive debt first.

Nationwide's consumer finance director, Jeremy Wood, said: "We believe the UK should follow the U.S. and make card providers allocate payments in a positive way. Consumers can ill-afford to lose this much money, especially in the current financial climate. We feel it is time for the Government to intervene and introduce regulation to benefit those affected. In the meantime, credit cardholders should look at how their card provider allocates payments. They could certainly save money by switching to a provider, like Nationwide, who pays off the most expensive credit card debt first."