Credit Card Interest Rip-Off
According to a survey by Nationwide Building Society only 29% of credit card customers are aware of the fact that many credit card providers always pay off debts charged at the lowest interest rate before paying off the debts with the higher rate of interest, making themselves an additional £500 million each year from this credit card interest rip-off. Most credit card companies use this method to reduce the balance owed on your account to suit them, not you - a sneaky way of maximising the interest that you end up paying.
Most people are too optimistic in the sense that many credit card customers trust in their credit card company too much and assume that the company has their best interest at heart, when if fact it only has interest in the amount of money they will be able to make off of their customers’ debt.
Figures from the survey reveal that 18% of people assume that the longest outstanding debt is paid off first, with another 12% believing that the items with the highest interest rate is paid off first. What seems to be the most disturbing is that a large percentage admits to not having a clue as to how their debt is paid off; roughly 26% admit to not knowing how their debt is paid off. However, this could all change as the Department of Trade and Industry has ruled that starting in October 2008 all credit card providers must draw attention to the order in which payments are made. This is part of general trend towards governing bodies keeping an eye on financial services, such as personal loans, insurance, banking and other forms of consumer credit agreements.
Consumers finding themselves paying vast amounts each month from their credit card bills and yet paying little more than the minimum amount would be wisest to consider a debt consolidation loan. Customers usually find that they can continue paying the same each month in loan repayments and yet most of the sum repaid will be capital, not interest, leaving them to clear the debt in record time.