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Credit Cards -
OFT call for credit card companies to help consumers to find the best deals
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The Office of Fair Trading (OFT) has said that credit card companies should make it more straightforward for consumers to compare deals and shop around for the best arrangements.
This comes following research by the OFT that showed 70 per cent of card holders had not assessed which provider would best suit them.
By making the terminology easier to understand and offering people better information about the charges different cards carry, the OFT believe it would be far more helpful for credit users.
They also believe a credit card comparison website, governed by the City watchdog, the Financial Services Authority (FSA), would prove beneficial.
A spokesman for the OFT said, “The consumer is faced with a less than straight forward choice due to the number and complexity of the products. Cardholders are throwing money away by not comparing cards before making an application and losing £400 million a year by not understanding calculation methods.”
The OFT survey revealed that the most common reason for people to choose one particular card was as a result of a recommendation from their bank. They referred to a report which had estimated that the average customer could lose as much as £137 a year by choosing an average priced card rather than the cheapest.
A complaint to the OFT from consumer group Which? said they were concerned of the different ways in which card providers calculated interest rates, which had resulted in the same APR costing consumers different amounts.
The OFT however, rejected the call for a standardised calculation method, but said it was clear that prospective card users did need further help to shop around.
Chief Executive at the Office of Fair Trading, John Fingleton said, “No one wants to throw money away, but consumers who don’t shop around for credit cards are doing just that. It is essential that consumers are given the right tools to make comparisons between credit cards more easily, and we can achieve this through some of the recommendations announced, which have received widespread support from the FSA, Apacs and the rest of the financial sector.”
The governing body for the card industry Apacs said they welcomed the OFT’s report and would work closely with the FSA to produce the comparison site. Apacs spokeswoman, Sandra Quinn said, “We are backing the OFT in hoping that these proposals will spur customers on to make better decisions, by building upon the work already undertaken by the industry to make credit card products more transparent.”
After consultation with Which?, Apacs said they would like to see four recommendations introduced. The first proposal was the introduction of the price comparison website, which was to be run by the FSA. They also said they would like to see improvements in how information is presented in credit card providers summary boxes.
The other suggestions included a standardisation of the terminology used by card issuers in their product literature and an improvement to consumer education about the benefits of shopping around for the best deal.
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