Misleading deals rack up £500m profit for credit card firms, says study

Balance transfer deals and other introductory offers are earning credit card providers an estimated £500 million every year, estimates Nationwide Building Society.

It has calculated that the normal practice of paying off the cheapest borrowing first while more expensive credit racks up interest costs average borrowers £100 in interest a year.

Almost all credit cards in the UK pay off more expensive borrowing after cheaper balances.

“Many credit card providers use low introductory rates to lure people into opening an account,” said Nationwide executive director Stuart Bernau.

“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.

“Most providers apply repayments to the cheapest debt first making it more expensive for you and more profitable for them. We call on the industry to play fair by consumers and apply repayments to the most expensive debt first.”

Two-fifths of credit card users admitted that they did not realise that their debts were not considered equal.

Saga, Liverpool Victoria and Nationwide are among the few credit card providers who pay off the most expensive debt first.

© Adfero Ltd

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