Borrowers boosted by credit changes

Credit card providers must use borrower repayments to clear the most expensive debts first, under new rules that came into force yesterday.

Some lenders have long maximised their revenue by using repayments to clear the cheapest debts first, meaning the whole debt takes longer to repay. But rules introduced as part of the European Consumer Credit Directive make this illegal, assuring consumers that debts with the highest interest rates are paid off first.

There is also a new 14-day cooling-off period, during which time borrowers can cancel a credit agreement, while lenders must now provide at least 60 days' notice of any rise in the interest rate on an existing credit card or loan.