The Office of Fair Trading (OFT) has missed an opportunity to make it easier for consumers to choose the best credit card for them, Which? says today.
Last year we called on the OFT to standardise the way credit card companies calculate interest.
Our research found that the top 20 credit card providers used 12 different methods to apply interest charges to their customers’ accounts.
This effectively means that two people who have different cards with the same annual percentage rate (APR), and who use their credit card in the same way, could be paying very different levels of interest.
Which? argued that APRs could not be trusted or used in like-for-like comparisons of different cards. We said consumers were losing about £415 million a year because of confusion caused by different ways of calculating interest.
The OFT has now admitted, in a report released today, that it’s difficult for consumers to easily find out which is the cheapest credit card for them.
The watchdog says that almost 70% of people don’t shop around for the cheapest deal and that those who choose an average priced credit card rather than the cheapest option are losing an average of £137 a year.
But it doesn’t believe that standardisation is the answer.
Instead the watchdog has called for a new independent credit card price comparison website to be set up and run by the Financial Services Authority.
The OFT also wants all credit card firms to use the same terminology to describe charges and conditions, and to improve how information is presented to consumers.
Which? Chief Executive Peter Vicary-Smith said: ‘The OFT has missed the chance to insist people are given a way to compare credit cards that they can actually understand.
‘Yes, these recommendations will make it slightly easier to see how much a credit card’s going to cost.
‘But there’s simply no way to make comparing credit cards as easy as it should be unless you standardise the way interest rates are calculated.’