5th April 2007

Which?, the consumer group has requested an investigation into how credit card companies calculate interest. According to Which? the top 20 credit card companies, who account for around 90% of the credit card market, charge interest in 12 different ways.

"People believe that Annual Percentage Rates, APR's are a dependable way of comparing credit cards, but our research shows that APR cannot to be relied upon for true credit card comparisons" said a Which spokesperson.

According to Which?, when two consumers, one with a HSBC MasterCard and one with a Sainsbury’s Bank MasterCard, which both charge an APR of 15.9 per cent, use these two credit cards in the same way, then the consumer with the Sainsbury’s MasterCard will pay up to £25 more a year than the person with the HSBC MasterCard.

Which? has used its legal powers to launched a super-complaint to the Office of Fair Trading asking for standardization of the methods of interest calculations and believes that if all credit card issuers used the same interest calculations that consumers would be able to compare like for like and make a meaningful credit card decision on the basis of the APR.

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Glossary

Interest

interest is an amount charged to the borrower for the privilege of using the lender's money.

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