Credit cards: appearances can be deceptive, says Which?

Credit cards: appearances can be deceptive, says Which?

	Published : Thu, 02 Feb 2006 11:20 By : David Simms Print this Story

LONDON: Consumer watchdog Which? said credit card providers tend to confuse consumers by disguising their charges and packaging their offers look attractive and cheapest.

The organisation said its research has shown that cards charging higher annual percentage rates (APRs) are sometimes cheaper than those offering more competitive rates upfront. It all depends on how many days' interest they applied.

Which? said many cards applied interest from the date of purchase. There are others who started calculating interest from the date on which they made actual payment to the retailer. Citing an instance, Which? said Cahoot's card, which charged 11.8 per cent APR could work out more expensive than HSBC's card that charged 13.9 per cent.

It claimed that a person who had borrowed 2,800 pounds over a year and paying the balance in full every four months, would pay 40 pounds on a Cahoot credit card and 38 pounds on an HSBC card.

Which? editor Malcolm Coles said the credit card industry should use one standard way to charge interest so that consumers will have real options. "It's ludicrous that a card with a lower interest rate can cost more than one with a higher rate," he said.

Card payment association APACS said card users can compare the true cost of the credit they avail by studying the summary box, which mandatorily provides such information.

Card users buying goods using credit cards get between 45 and 56 days to repay the amount before the card provider starts charging interest. The interest will then be charged from the date on which the purchases were made or on which the card provider paid the retailer. Some card providers charge interest on money owed from previous months only up to the date they produce the bill, and still others charge it up to the point they receive payment. In all there are 14 different methods used by credit card providers to calculate the interest, Which? said.

If all credit cards had the same interest rate, the most expensive cards would cost 83 per cent more than the cheapest ones because of variations in when they started and stopped charging interest.

The treasury's select committee had last year told the credit card providers to clear up its act on this issue but the industry is acting slow to formulate a standard.