Negative payment ‘fiddling’ widespread
October 31, 2007 by admin
Filed under News, News-Credit-Cards
Recent research shows that a staggering 296 out of 300 credit card providers use a negative payment hierarchy.
According to Fool.co.uk, 99 per cent of people with a regular balance on credit cards with varying interest rates on debts are being ripped off by their provider.
“It is not illegal to fiddle with the order in which payments are allocated on credit cards. But negative payment hierarchy is a devious way to exploit customers’ inexperience,” said David Kuo, head of personal finance at the finance site.
“Our study shows that whilst the vast majority of card providers employ this sly practice, Nationwide and Saga should be applauded for their use of ‘positive’ payment hierarchy,” he added.
Those particularly at risk from negative equity payments are people using zero per cent credit cards for balance transfer as well as purchases and cash withdrawals.
Repayments made on the card will then go towards pay off debts with the cheapest interest first, while debts with heavier interest are left to stack up interest charges and earn the provider money at the cost of the card holder.
Nationwide have revealed that consumers could pay an estimated £500 million on interest without knowing before banks are required to outline the order in which payments are made next year.
