The OFT has announced a new programme of work with the credit card industry and consumer bodies to make the cost of credit cards, easier for consumers to understand.
 
This has occurred due to a super-complaint from Which? The complaint came about because Which have found that consumers taking out credit cards are doing so without fully understanding all the cost implications that affect credit cards and the huge diversity in the credit card market.

One of the major concerns is that the majority of card holders do not compare credit cards and they can be very different.
The OFT will look to work with the credit card industry to review the issues surrounding the costs of credit cards including purchases, cash advances, introductory offers and payment allocation.

It is expected that the review will take approximately six months to complete and will involve the “credit card industry, consumer groups, other regulators, government bodies and other key stakeholders.

“One area that I recommend anyone who uses a credit card over a long period of time to consider is how much is the minimum monthly interest charge required by the Lender. For example many Lenders now only require a minimum of 2.25% of the outstanding balance to be repaid.

A few years ago the minimum amount used to be 5%. For example a £3,000 balance on a credit card with an APR of 16.9% and requiring a minimum amount of 2.25% of the outstanding balance to be repaid monthly would take 325 months to clear the balance (yes that’s 27 years and one month!). Always try to pay off more than the minimum whenever you can or look to consolidate your credit cards into a more affordable loan over a reasonable time period which suits your budget.”

- Steve Burnage