Credit card companies accused of confusing customers

| February 12, 2008 | 0 Comments
Credit card companies accused of confusing customers

The Office of Fair Trading (OFT) has criticised credit card companies for taking £400 million a year by confusing customers and making their products too complex to compare.

OFT established that 70% of customers do not shop around and could therefore be wasting their money. OFT is recommending that a card comparison website be launched by the Financial Services Authority (FSA).

John Fingleton of the OFT said consumers who do not shop around for credit cards are throwing their money away. It is vital that consumers are given the right tools to make comparisons between credit cards more easily, this can be achieved by having the following available on comparison sites.

1) improved presentation of credit card issuers’ summary boxes
2) standard terminology in credit card product literature
3) improved consumer education about the benefits of shopping around.

An investigation into this matter was requested by Which?, the consumers’ association, last April after establishing that the top 20 card issuers used 12 different ways to calculate their interest charges.

As a result, this meant that a card with a lower Annual Percentage Rate (APR) could actually be more costly to use than one with a higher APR.

The OFT has examined the varying cost of using cards depending on whether they were used for borrowing cash or purchasing items. In addition, it looked at introductory offers and the different policies for deciding in what order the items on a credit card bill are paid off.

The OFT report said that not only were credit cards expensive ways to borrow, they were complex. The way in which credit card companies describe the way their credit cards work has been criticised for using confusing language.

This announcement has been welcomed by Apacs, the trade association for payment services. Sandra Quinn of Apacs said the new FSA website should be of great help to consumers.

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