A credit card trick banks use to increase their charges

Filed Under Finance

I mentioned a few weeks ago that you should be wary of hidden credit card charges that banks can spring on you. Well, today another trick that bank use to increase the charges of their credit cards has come to light.

Credit card companies are using an “order of payment” to increase their charges. Basically this means that they pay off low interest earning payments first and those payments that attract the highest charges, last.

For example, a cash withdrawal attracts more charges than a normal purchase so if you do not clear your monthly bill, the credit card company will use your money to clear the cheap debts first, keeping the expensive cash advance unpaid. It can therefore maximise its charges to you, and this is all within their terms and conditions.

So what can you do about it?

Well firstly ask your credit company if the practise of “order of payments” applies to your credit card. If it does then you should consider carefully the impact that cash advances and balance transfers can have on your monthly charges. You could also try and find a credit card that doesn’t use this “order of payments” approach, but they are very hard to find, as our article on MoneyHighStreet.com, points out.