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By Julia Kukiewicz
Editor
7 June 2010
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MBNA credit card transactions which attract the highest interest rates will always be paid off first, the company has announced.
MBNA is one of the first providers to pre-empt new laws which will make positive credit card allocation of payments clauses mandatory in January 2011.
The new rule will save credit card holders hundreds of pounds. According to Nationwide, it leads to 9 million borrowers paying out an average of £225 a year.
Nationwide credit cards and Saga credit cards are the only other issuers who currently offer a positive order of payments on all their products.
MBNA credit cards are known for being partnered with big brands - the BT retail credit card and Sony credit card, for example - but this news is no guarantee that they'll accept the same terms.
Having said that, early indications are good. The AA credit card has already confirmed that it'll bring in the same changes.
The September Issue
MBNA's positive order of payments rule will come into force in September.
In the meantime, however, MBNA customers will be in the same boat as thousands of other credit card customers: paying off the priciest balances last and getting landed with hefty interest charges as a result.
There are a few things credit card holders can do to minimise the problem or avoid it altogether:
- Avoid cash transactions: not only is the interest rate higher than for purchases there's no interest-free period.
- Know what counts as a cash transaction: it's not just ATM withdrawals, cashback at the till and gambling count too.
- Don't spend on balance transfer credit cards: avoid accruing interest when you're meant to be minimising it.
- Don't forget about PPI: if you have payment protection insurance it'll usually be paid off even before purchases so make sure you account for it.
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