Some of the requirements of the Consumer Credit Directive (CCD) have already come into effect, and others must have been implemented by today, 1 February 2011. Many consumers are unaware of the changes that are coming, even though these changes can help consumers make better credit card choices.

One of the biggest changes is the changeover to what is called positive payment order. Before the CCD, most cards allocated payments to the balances with the lowest interest rate first, causing the balances with higher interest rates to stay unpaid longer, greatly increasing the amount of interest card companies could collect. Now the payment order must be so that consumers clear their most expensive (interest-wise) balances first (Nationwide and Saga have always used the positive payment order system).

Another change brought by the CCD is the introduction of a “representative APR.” This is an interest rate that has to reflect at least 51% of the business the credit card company expects from a particular ad, including all cost of credit information, such as balance transfer fees and annual fees. If more than one interest rate is applicable (such as a different balance transfer and purchase rate), the rate that applies to the most common payoff method has to be shown. With 0% credit cards, annual fees (and any other fees) must be calculated into a representative APR.

Also, if the 0% balance transfer rate lasts for a short time, the duration of that period, as well as the rate it will to when the 0% offer ends, should be shown. This should make it easier to compare credit cards. If you have credit cards, it is important to understand that the changes from the CCD are fundamental changes to how credit card interest rates are calculated and advertised. Ultimately, the changes should help consumers choose more wisely among the various credit products.