Nationwide highlights omission in Which? Super-complaint to OFT

Nationwide Building Society welcomes the announcement by Which?, that it has lodged a super-complaint with the Office of Fair Trading (OFT) on credit card interest charges.

The Society, which has long-campaigned for transparency in the credit card market and which led the introduction of the credit card summary box in 2003, would also like to see the OFT investigate the adverse order of payments adopted by most credit card providers.

An adverse order of payments is where card providers choose to allocate payments first to outstanding balances at the lowest rate of interest (for example, 0% balance transfers), leaving balances at higher interest rates, such as purchases and cash advances, to continue to accrue interest. Nationwide is the only major credit card provider that applies payments to the most expensive debt first across all of its credit cards.

Nationwide would like to highlight that when payments are allocated in an adverse way, it can significantly increase the interest cost that the consumer has to pay. Because this practice is not well understood by consumers, and is not in their best interests, it is effectively a hidden source of profit for credit card companies and costs consumers £500m each year. Nationwide always allocates payments received from its credit cardholders in a way that is favourable to them, and pays off the more expensive parts of their credit card debt first.

Nationwide divisional director, Jeremy Wood, said: "The super-complaint only goes so far for consumers. Surprisingly, it misses one of the biggest sources of profit for card providers. 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.

"We urge the OFT to investigate the order of payments card providers adopt, as most of them apply repayments to the cheapest debt first making it more expensive for consumers and more profitable for them. If order of payments is ignored consumers will continue to lose out."