Credit card bills to be exposed

New legislation, to be introduced next year (2008), will change the way credit card companies present your statement.

The Department of Trade and Industry is compelling credit card companies to draw attention to the order of payments on your debts. Don't worry if you haven't heard about "order of payments" before since two thirds of us haven't heard of it either.

The order of payments on your credit card bill is the sequence in which you pay your debts back. You may or may not be aware that you have different levels of interest charged on credit card bill. Balance transfers, purchases, and cash advances all attract different levels of interest charges. Surprising for most people is, that it is not the most expensive debt which is paid off first but the cheapest one.

Recent research by Moneyexpert.com revealed that three quarters of credit card firms use the order of payments to their advantage by making their customers pay off the cheapest debt first, earning more money on the most expensive borrowings.

The research revealed that 76% of credit cards leave cash withdrawals to be cleared last. This means that the most expensive debts are the last to be paid off. With average interest rates of 23.9% on cash withdrawals it can be easily seen that the credit card companies see this as very profitable strategy.

Debtwatchdog urges you to check the order of payments on your credit card. Either switch to a credit card provider which clears the most expensive debts first or clear your credit cards debts every month.

Read Debt Management Strategy for tips on how to snowball your credit card debts. Don't forget our debt forum where you can get help from people who have experienced similar problems as you.