A major credit card shake-up starts tomorrow with MBNA set to end a long-standing stealth charge that penalises those who spend on their card after making a cheap balance transfer.

It's not just those with MBNA-branded plastic who will benefit as the company also runs numerous other credit cards including those from Amazon, BT, Play.com, Sony, The AA and Virgin Money (see the Best Balance Transfers guide).

But the vast majority of credit card holders with other banks must wait months before their provider removes this spending trap.

The shake-up is a result of a government crackdown on card firms using your payments to clear your cheapest debt first (such as a 0% balance transfer) leaving debt at higher rates (such as spending) trapped, accruing interest at a rate of knots.

By the end of this year, payments must clear your most expensive debt first, following the agreement between the Government and the card industry (see the Credit card crackdown MSE News story).

While those who spend after completing a balance transfer are most likely to be hit, the negative order of payments, as the payment trap is often called, affects anyone who has balances with different interest rates on the same card, such as those who spend and take out cash (as withdrawals are usually more expensive).

Nationwide Building Society says this card industry trick costs someone who spends after transferring a balance an average £224 a year in extra charges.

Most card firms, other than Nationwide and Saga, use a negative order of payments hierarchy. Many are waiting until the last possible moment to change their practices.

Below is a table outlining when each major provider plans to change its order of payments from negative to positive.

When will the order of payments trap end?
Provider Date
American Express November (no exact date given)
Barclaycard by 31 December
Capital One 19 November (i)
Egg by 31 December
Halifax / Bank of Scotland 20 November
HSBC / First Direct / M&S by 31 December
Lloyds TSB by 31 December
MBNA 1 September
RBS / Natwest by 31 December
Santander by 31 December
(i) Some new customers must wait until 31 Dec. Nationwide and Saga already offer positive order of payments.

How to spend wisely

If your card firm continues to use a negative order of payments system, you should never spend on the card after completing a balance transfer.

Dan Plant, MoneySavingExpert.com money analyst, says: "While it is good news the industry is finally changing some of its profiteering ways – albeit after significant pressure – millions must still beware this stealth charge and not spend after a balance transfer on the wrong card, or they'll risk huge interest penalties."

MBNA adds that it will clear the highest interest-bearing debt you have at the point you make your payment, not at the point of your most recent statement.

This means if you make a purchase after your statement is produced, at a higher rate to any debt you owe on your statement, any payment will clear that more expensive debt first.

Further reading/Key Links

How to get help: Debt Problems
Cut credit card debt: 0% Balance Transfers And Purchases, Best Balance Transfers

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Credit card shake-up