Some customers think credit card providers are unfair

Credit card customers are not entirely satisfied with their lenders due to some dubious debt repayment practices, it has been revealed.

According to a recent poll, which was conducted by Nationwide Building Society, nearly two-thirds of credit card customers think it is unfair that lenders make a profit by clearing their cheapest debt first when they make a payment.

Furthermore, more than half (56 per cent) said they would be angry if their lender did this to them and 38 per cent said they would be shocked.

However, only ten per cent said they would be surprised, suggesting that consumers anticipate such behaviour from credit card firms.
What 65 per cent of those polled agreed on was that it would be unfair for credit card firms to make additional profit from operating on an adverse order of payments.

Nationwide's product and marketing director, Chris Rhodes, said that his firm's research proved unequivocally that consumers still do not understand the issues surrounding repayments and are being penalised for their lack of knowledge.

He said: "Further transparency will simply not work. This is a fairness issue and a positive order of payments is now the fairest way forward for consumers."

The system whereby the cheapest debt is repaid first is common among credit card lenders. The practice is called a negative payment hierarchy.

Essentially, it means the debt with the highest rate of interest will take the consumer the longest period of time to repay.

In the meantime, the credit card firm continues to make money from the interest on that debt, which consumers cannot get to in terms of making a repayment until their less-pressing debts are cleared.

Mr Rhodes called on the government to intervene and bring an end to the "unfair practice".

He said: "We hope the Department for Business, Innovation and Skills review makes negative order of payments a thing of the past."
Nationwide bills itself as the only high street lender to offer a positive order of payments, whereby the most expensive debt is repaid first.

Meanwhile, Free Debt Advice has issued those struggling with credit card debt some recommendations for tackling repayments in a sensible manner.

It advised that now is a good time for consumers to negotiate with their lenders, as credit card firms have had to readjust their priorities during the recession.

A spokesperson for the firm said: "So, do not waste any more of your valuable time and go ahead to eliminate your outstanding amounts so that your financial wing comes back to track."