Consumers 'confused by credit card interest rates'
Published On 19 March 2007
Consumers are confused by the interest rates they are being charged on their credit cards and this means that they are unaware that costs have risen significantly in recent years, according to new research.Website uSwitch.com has published data which shows that 6.6 million people now withdraw an average of £809 in cash on their credit cards every year.
Equally, the website found that the average APR on cash withdrawals using credit cards has increased from 20.3 per cent in 2005 to 27 per cent in 2007.
However, as 61 per cent of consumers said that they do not understand the different between APR and per annum interest rates, uSwitch is concerned that people are unaware of these increases.
"Consumers could be forgiven for thinking that they are being treated as the banking industry’s personal ATM," said Nick White, the website's director of financial services.
"With some providers now charging up to the APR equivalent of 31.23 per cent on cash withdrawals, which is higher than the average sub-prime credit card of 30.9 per cent APR, cash rates have become sub-prime rates masquerading as mainstream lending."
Mr White added that the people who often use their credit cards to withdraw cash are "struggling under the burden of debt and are having to resort to this method of borrowing to make ends meet."
Despite attempts by the government to simplify the way credit cards advertise their interest rates, uSwitch has called for more to be done to help consumers.
