Credit card providers make an estimated £500 million extra in profit every year from repaying a cardholder's cheapest debt first, according to new figures.

Nearly all UK card providers choose to allocate payments first to outstanding balances at the lowest rate of interest (eg nought per cent balance transfers) leaving balances at higher interest rates (eg purchases and cash advances) to continue to accrue interest.

Nationwide Building Society research reveals almost 60 per cent of consumers think it is important to find a credit card that applies a positive order of payments but many, over 30 per cent, are still unaware of how payments are applied to their accounts

Often the last balances to be paid off are cash withdrawals, attracting the highest interest rates, affecting 45 per cent of credit card holders who have taken out cash using their credit card at some time.

"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," said Nationwide executive director, Stuart Bernau.

"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."