£3 billion credit card wastage
01 July 2004
Credit card users are wasting £3 billion a year on bills because they do not understand how the interest is calculated.
This is according to a report from the Liberal Democrats, which found that millions of cardholders are paying more than twice what they need to.
With outstanding card debt currently standing at £35 billion Malcolm Bruce, the Lib Dems' trade & industry spokesman, feels the problem is an unnecessary waste.
Speaking about the problem he said: "Cardholders are forking out billions in avoidable interest. This money is simply fuelling the profits of banks instead of driving the real economy."
He added: "It cannot be right that 75 per cent of consumers do not know the interest rate they are charged."
The report revealed the average interest rate paid on credit cards is 15.9 per cent. Yet other deals charge only 6.8 per cent for customers with a good credit history.
Mr Bruce was also highly critical of many of the zero per cent offers: "Most of us would need to use an accountant to avoid the pitfalls of zero per cent introductory deals, many of which leap to much higher rates after the offer period ends."
This October standard summary boxes come into force, which should ensure that adverts are clearer and make it easier for consumers to compare credit cards.
But Mr Bruce believes more needs to be done: 'We need a statutory obligation placed on card issuers to show how the rates they are offering compare with independently produced averages."
In an initial review last November, the OFT found that 36 per cent of credit adverts in eight national newspapers broke the law by failing to give due prominence to the interest rate.