02/02/2006 18:13:00
Comparing credit card interest rates is practically "impossible" when it comes to finding the best deal, Which? magazine has concluded.
The consumer group studied a number of lenders and found that the range of different systems used to calculate headline rates made a straightforward comparison almost "meaningless".
Based on their own calculations, Which? found that HSBC's 13.9 per cent rate could work out better value for the consumer than Cahoot's 11.8 per cent.
"It's ludicrous that a card with a lower interest rate can cost more than one with a higher rate," said Which? editor Malcolm Coles.
"Which? wants the credit card industry to use one standard way to charge interest so consumers really can choose the cheapest card."
The consumer group explained that the real cost of borrowing depends on when interest rates begin and end, with the different lenders using 14 systems between them.
Most cards charge interest from the day of purchase, but some wait until the lender has paid the retailers. Similarly, some companies stop charging interest when they send out a monthly bill, whereas others wait until payment is received.
Additionally, Which? found that some lenders cancelled apparently attractive zero per cent deals if an unpaid balance rolled over from month to month.
Combined, these differences mean that charges on two cards with the same headline rate can vary by 83 per cent in real terms.
As from last year, many companies have been including an "honesty box" on credit card statements, outlining all charges incurred.
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