24 July 2007
The cost of using a credit card is to be simplified thanks to work from the Office of Fair Trading (OFT).
The OFT is to set out guidelines and information in an accessible manner for consumers to read after it became concerned that consumers were unaware of the ways in which credit card companies managed peoples' money.
One of the most controversial aspects of credit card repayments this year has been the order of repayments, which dictate which 'part' of a consumer's credit card debt is paid off first.
Often, a credit card company will receive cash from a customer but pay off the debt with the cheapest interest repayments first, meaning deals such as '0% on transfers for a year' could end up costing a customer a lot of money if they ever make a withdrawal, for instance.
The OFT carried out research which found that most customers believed comparing an APR was the best way of deciding which credit card would be cheapest, which can be wrong.
John Fingleton, OFT Chief Executive, said: "Credit card pricing has become increasingly complex, with many new dimensions such as interest free periods.
"While these give additional choice and value to consumers, they can make it harder to make informed decisions."
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