28 Nov 2024

Moneyfacts welcomes credit card reforms

Michelle Slade, spokesperson for Moneyfacts.co.uk comments:

“For far too long the card companies have been able to get away with practices that are not in the best interests of the consumer.

“Most consumers are unaware of the payment hierarchy system on credit cards, that in most instances sees the cheapest debt repaid first while the most expensive debt is paid off last.

“This practice earns the card companies a fortune in additional interest at the expense of the consumer and goes against the advice consumers would receive at a debt agency, which tells them to repay the most expensive debt first.

“Card companies including Bank of Scotland, Capital One Bank, Halifax and MBNA Europe Bank have all made recent moves to reduce the minimum payment customers are required to pay.

“This process that gives short term gains to customers looking to reduce their outgoing, but stores up longer term problems, as the total amount they will end up paying will be much greater.

“Increasing the minimum repayment will reduce both the total interest paid and the time it takes to clear the debt and will have a positive impact for most customers.

“For customers already struggling to meet repayments, an increase in how much they are required to pay each month could tip them over the edge. More measures would need to be put in place to stop these customers getting further into debt.

“Cleaning up the credit card industry’s act is to be applauded, but the moves are likely to leave a big hole in the coffers of card companies.

“If history repeats itself, we are likely to see customers paying for this lost revenue elsewhere.”

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

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