Virgin Money has joined a growing list of credit card providers introducing a positive order of payments earlier than the deadline agreed with the government, a move that could save customers hundreds of pounds.
From 1 September, consumers who use the same credit card for different purposes should pay less interest.
Under the old rules, any repayments made by the cardholder were allocated against the debt with the lowest interest rate first. For example, if you transferred £1,000 onto a credit card under a 0% balance transfer deal and then spent £1,000 on new purchases at 15.9%, any repayments you made would be allocated against the 0% balance first, leaving the purchases to rack up interest at their standard APR until the 0% balance was paid off in full.
Under the new rules, to be introduced across the industry by the end of the year, payments must be allocated against the most expensive debt first, reducing the amount of interest cardholders will have to pay. For more details on the order-of-payments trap in force at the moment, check out the Which? guide to choosing a credit card.
A welcome move by Virgin, but customer service is very poor
Which? credit card expert Martyn Saville commented: ‘This is a welcome move by Virgin. Which? has long been calling for an end to this unfair practice, so it’s pleasing to see the new order of repayment rules coming into force. The Virgin card is issued by MBNA, who will also be introducing a positive order of payments from 1 September.
‘The bad news is that Virgin comes joint last with MBNA in the Which? customer satisfaction survey, scoring an embarrassing 51%, compared with the impressive 88% attained by John Lewis/Waitrose. While the positive order of payments change is a promising first step, Virgin’s next aim must be to improve the service it offers its credit card customers.’
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