Judging the hidden costs of credit cards
Recent reports from CreditAction and the National Debtline
appear to show that UK consumers are becoming more financially
aware and are looking to reduce their levels of personal debt
which have spiraled seemingly out of control over the past few
years. Despite the industry wide introduction last
year of the "honesty box" in all credit card statements designed
to outline the costs of loans and any additional charges, it
seems that the activities of some of the financial services,
especially certain credit card companies are misleading
consumers and making it difficult to determine the true costs of
many financial products. The consumer group Which? has launched an attack
against the interest rates quoted by credit card companies. The
problem revolves around the fact that there are around 20
different methods used by lenders to calculate interest charges
and these make it extremely difficult for consumers to determine
which credit card is cheapest, and have a huge impact on the
amount that is ultimately repayable. Which? states that, "if you
had two cards with the same interest rate and used them in
exactly the same way, one could end up costing over twice as
much as the other just because it calculated your interest
differently." Moneynet chief executive,
Richard Brown, said, "Consumers are led to believe that the
cheapest loan is the one with the lowest APR. But this is far
from the truth - borrowers should be aware that a loan package
does not always do what it says on the tin." Martin
Coles, editor of Which?, said, "It's ludicrous that a card with
a lower interest rate can cost more than one with a higher
rate." Which? cite an example of borrowing