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Want the advertised credit card APR? Forget it

Proportion of people offered best rate set to drop

Store cards for high-street credit

Many high-street retailers offer store credit cards

New credit card rules that come into force on 1 February could mean that even fewer applicants for a new credit card are offered the advertised rate.

When a bank advertises a credit card at a particular rate, it currently only has to offer two thirds of successful applicants the advertised rate and can charge the other third a higher APR.

However, when the European Consumer Credit Directive (CCD) takes effect on 1 February, the two-thirds figure is going down to 51%, making it easier for credit card companies to offer more consumers a higher interest rate than advertised. The knock-on effect is that it may prove harder for consumers to know what rate they’ll get when they apply for a credit card.

What can I do about the new credit card rules?

Which? credit card expert Martyn Saville explained: ‘In the short-term, the main action you can take is to check your credit file before applying for a new card. Any mistakes on your credit report make it less likely you’ll be accepted for the card at the advertised rate. If you want certainty over the rate you’ll be offered, consider applying for a card from a provider that doesn’t use risk-based pricing.’

Under the risk-based pricing system, credit card providers look at your personal circumstances and decide if they’re willing to offer you a credit card. If they decide that they will, they will then select an interest rate (APR) that matches their view of how risky you are. The higher the risk you pose of not repaying the debt, the higher the APR.

In theory, there’s nothing wrong with risk-based pricing, provided the way it is used is transparent. For example, some banks have different cards, with different APRs, aimed at consumers with differing credit scores and histories.

One new entrant to the banking market has bucked the trend towards risk-based pricing and has launched a single credit card with the same APR for all. Metro Bank offers the same interest rate of 13% to all successful applicants, removing the doubt over what rate you’ll be offered. Paul Marriott-Clarke, managing director of retail banking explained: ‘At Metro Bank we offer simple products with no hidden catches. A big part of making sure that our products do exactly what they say on the tin is making sure that all of our customers pay one fair rate for credit.’

Get the best credit card with the best APR

To find the best credit card for your needs, read Which? credit card reviews.

The free Which? guide Your credit report explained gives details of how to get your £2 credit report, how to correct mistakes and how to improve your chances of getting credit.

Which? debt, credit and loans surgery

Which? Money is running an online debt, credit and loans surgery between 12pm and 1.30pm on Monday 31 January. Which? members can ask our panel of experts all their credit and debt questions.

Whether you’re looking for the best credit card to use abroad, hunting for the best personal loan, want to ask about credit card protection or need independent help in finding the best debt advice service, sign up now for an email reminder and join us on the day with all your questions.

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