Balance transfer users 'risking negative payment hierarchy'

By Sarah Engle, Thu 3 Jun 2010 - Published in Credit Cards

Most people have started to spend using a balance transfer credit card, new figures have revealed.

Research carried out by moneysupermarket.com showed that 63 per cent of balance transfer card users have put new purchases on the products - leading them into a 'negative payment hierarchy'.

The organisation explained that this means the balance with the lowest rate, which in this case is the zero per cent transfer, is paid off first, leaving interest to accrue on the other.

According to the research, spending just Ł50 on a balance transfer credit card could lead to Ł106 in interest being built up through negative payment hierarchy over the course of a year.

Kevin Mountford, head of banking at moneysupermarket.com, said: "It is still worrying that many credit cardholders still make the crucial error on their cards of using them for both balance transfers and purchases."

Recently, Richard Sorsky from the UK Insolvency Helpline Debt Advice Service cautioned against paying for day-to-day expenses with credit cards.

News Categories

News Archive

News: Balance transfer users 'risking negative payment hierarchy'