Positive payment

A new dawn for credit cards can be seen on the horizon, and this time it’s very beneficial for the consumer. Starting next year, all UK credit cards will be using positive debt payment hierarchy on credit card debt. This may sound fancy, but it’s actually quite simple – and it makes a lot of sense as well. It is said that using this system will save people hundreds if now thousands of pounds in interest payments.

What happens with a lot of credit cards nowadays is that different uses of the card – cash withdraw, payments or balance transfers, for example – have different interest rates associated. The interest for balance transfers can be very low while the interest for cash withdraws can be significantly high. With a negative payment hierarchy the lowest interest debt is paid first, meaning that the highest interest debt is accumulated and ends up costing the user a lot more. With a positive payment hierarchy the exact opposite happens. The debt with the highest interested rate will be consolidated first, reducing the amount of money users will have to pay in the long term. These are excellent news for credit card users and it might help re-launch the use of credit across the country.