June 07, 2010
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News: MBNA Helping Cardholders Reduce Debt
MBNA, one of England's largest credit card company said it will be revising its method of payment application to cardholder's account in September ahead of the voluntary compliance deadline. Good news for cardholders who look to save hundreds of pounds in interest and aid in paying down debt quicker. Currently banks, including MBNA, apply payment principles to the lowest interest bearing balance while collecting greater earnings from the high interest bearing credit card balance. The practice means that when cardholders take advantage of special promotions such as zero balance transfer offers, credit card companies apply payment toward the zero balance debt while cardholders continue to rack up higher interest debt running anywhere between 10 to 30 percent from purchases.
According to Nationwide, who does not use this type of practice known as an adverse order of payment, over 9 million credit card customers are affected by the accounting procedure which cost the average cardholder approximately 225 pounds a year. The practice came under scrutiny earlier this year when the government made known its intention to rule against the practice. To avoid further regulation, the credit card industry agreed to voluntarily end the questionable abusive practice by the end of 2010. MBNA announced it will implement the change beginning September 1, 2010, the earliest time it can ready its system to manage the new requirements.
MBNA, who specializes in offering credit cardholders more than 400 affinity brand products, will also be working with these brands to ensure the change is being properly implemented. The bank is in continued communication with its brands which include AA, Amazon, Virgin Money, BT and Play.com. Most cardholders are unaware of the adverse accounting procedure which hopes to help them pay down debt quicker. Welcomed news by Michelle Slade of Moneyfacts.co.uk, provider of financial advice said this is welcomed news for cardholders looking to become more financially stable by saving them excess interest. She hopes that other card issuers will follow MBNA's lead.