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Credit cards must come clean
By Jeff Salway
The Department for Trade and Industry (DTI) has cracked down on an unfair credit card practices which cost borrowers a startling £500 million a year.
The DTI has now called for transparency and ordered the industry to clarify the repayment structure on every credit card statement.
Credit card providers use a payment hierarchy to clear debts, and most companies use customer payments to repay their cheapest debt first and most expensive last - leaving borrowers saddled with high-interest debts.
From next year, under the Consumer Credit Act, all lenders will be required to highlight the repayment structure prominently near to the closing balance figure on their statements.
Credit warning
Nationwide, one of the few providers to prioritise cheaper debts, welcomed the crackdown but said more needs to be done. Director Jeremy Wood said: "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 the surface you discover that credit card holders often don't receive the full benefit of these low rates."
Another new credit warning, following an investigation from the Competition Commission, is that customers who use expensive high-street store cards must be informed on their statement if the interest rate on their card is above 25%.
While this is good news, store cards are still notoriously expensive and should be avoided at all costs.
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