Credit Cards Debt Payments

It is a misconception among credit card holders that when you are paying off your credit cards the oldest debts are paid off first, or it may be that you have never even thought about the way in which the debt is paid off. In truth, your cheapest debts are paid off first regardless of when you used your credit card.

Different interest rates are applied for different products on your credit card such as purchases, cash advances, balance transfers and credit card cheques. Higher interest rates are normally applied for products such as cash advances and credit card cheques.

It’s not all bad news as a handful of credit cards providers actually pay off your more expensive debts first. You’re probably wondering what this has got to do with you and if it applies to you, well; by paying off your cheapest debts first the credit card provider will be making more profit and gaining more interest on the more expensive debts than from the lower interest debts. It is estimated that over 6 billion pounds of your money is being unnecessarily wasted in this way.

There are only four UK credit card providers that operate their payment clearances in a way that pays off your most expensive debt first. The four credit card providers are HSBC, First Direct, Nationwide Building Society and Liverpool Victoria.

If you are looking to pay off your credit card balance in full every month then the way in which the repayments are structured will not affect you but it is worth bearing in mind just incase one month you can’t make the payment in full that you have a low interest credit card or a credit card that pays off the more expensive debt first

There is a lot to consider when you are looking to purchase a credit card; it may be that looking for the lowest APR on your credit card may not be as good value as you first thought. Always read the small print on the application as this will tell you the structure of repayments. The way in which your credit is paid off is another view to which you should take into consideration when you are purchasing a new credit card.

Remember, all credit card providers are competing for your business so they will make their offers sound as attractive as they can, see beyond this and choose the best credit card to suit your needs and your wallet.

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