£500m profit from balance transfer credit card deals says research

Credit card providers are running a profit margin of around £500 million every year on balance transfer credit card deals and other introductory offers, says Nationwide.

The fat-profits are due to the providers charging variable rates for different types of spending and almost inevitably paying off the cheapest form of credit first.

On balance transfer credit card deals for instance, the sum transferred would be left until any additional purchases – at a higher rate of interest – had been paid for.

This costs the average card user £100 every year in additional interest charges, Nationwide has estimated.

"Many credit card providers use low introductory rates to lure people into opening an account," said Nationwide executive director Stuart Bernau.

"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.

"Most providers apply repayments to the cheapest debt first making it more expensive for you and more profitable for them.

"We call on the industry to play fair by consumers and apply repayments to the most expensive debt first."

Nationwide, alongside Saga and Liverpool Victoria, is one of the few card providers who pay off more expensive credit first.

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