The Rate Tart

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One of the nastier bits of small print in credit card contracts concerns the "payment hierarchy".

Say you have both a balance transfer debt, and debt built up from purchases on the card. Both are likely to have different interest charges. The payment hierarchy is the part of the contract that states which piece of debt is paid of first, if you choose to pay in part. Its almost always the least expensive debt that you pay off first, making the credit card companies fat fees.

Now Nationwide has broken ranks with other card providers and has backed the argument for credit card providers to reverse the traditional payment hierarchy in the consumers favour.

Nationwide commissioned research that found that 69% of cardholders don't know the order in which their repayments pay off the debt.

Nonetheless, 66% expected the credit card provider to arrange for the most expensive debt to be paid off first. Nationwide now claims to be the only provider to do this.

"Many credit card providers use low introductory rates to lure people into opening an account," said Jeremy Wood, divisional director at Nationwide.

"These offers can look very appealing, but when you scratch beneath the surface you discover that credit card holders often don't receive the full benefit of these low rates."