Fed's ruling ramps up pressure on Westminster

Published:

19/03/2009

Topic:

Press Release,Credit Cards

The Federal Reserve in the United States has at last ruled that providers will soon have to assign a credit card user's payment to their highest interest debt first.

• None of the UK's major credit card providers pay off your highest interest debt first
• Change could save a user hundreds of pounds
  

The legislative change if implemented in the UK could potentially save a credit card user hundreds of pounds in interest.

Moneysupermarket.com called for a change to this in February 2008 and most recently repeated its call on Tuesday in the wake of a rather weak Government report on credit cards.

None of the main eight credit card providers¹, which make up 87 per cent of the market, allocate repayments to the highest interest debt first, costing customers dearly.

Peter Harrison, credit card expert at moneysupermarket.com, said: "The common practise of providers is to allocate your payments to the lowest interest debts first.

"Credit card providers are quick off the mark to attract customers with zero per cent balance transfer deals. However, they are much slower when it comes to educating people on what that zero per cent actually means.

"Many users only paying off part of their balance are being stung because their money isn't clearing the highest interest debt first, such as a cash advance or purchase. That is why a zero per cent balance transfer card isn't a good thing to spend on.

"Consumers really need to stay one step ahead of the game if they want to avoid paying unexpected interest. They should look to get a different card to spend with, whether it's a zero per cent purchase card or a cashback card. The only balance transfer card that it's a good idea to spend on is one with an equally long zero per cent purchase offer, such as Halifax All In One which offers nine months on both." ²

- Ends -

Notes to editors:

1 - The main eight credit card providers are RBS, Barclaycard, MBNA, HBOS, HSBC, Lloyds TSB, Capital One and Egg.
2 - American Express Platinum Cashback has the highest cashback return.

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