Millions of adults are at risk of shelling out extra cash on credit card interest, blissfully unaware that the tantalising advertised rate may not be what they actually receive.
The current legislation allows credit card firms to offer the “representative APR” rate to a mere 51 percent of applicants, leaving a staggering 49 percent potentially facing steeper rates. This could result in these customers forking out hundreds more in interest, depending on their borrowed amount.
Graham Hambleton, a 68-year-old retiree from near Chichester in West Sussex, shared his experience: “My partner died and I wasn’t sure if I was going to have the money to cater for the funeral. I put the application in, they granted me the card and because of interest rates, the APR turned out to be higher than expected.”
He continued, expressing his resignation to the situation: “The advertised rate was 29% and I ended up accepting 34 percent. I couldn’t understand why it had gone up. I use the card for emergencies, things I desperately need. They put up everything, so it was just easier for me to accept it.”
A startling revelation from Capital One’s latest study indicates that around six million (11 percent) adults have applied for a credit card only to be hit with an interest rate averaging 14.9 percent above the advertised APR. For someone carrying a £1,500 balance over a year, this could mean coughing up an additional £223.50 in interest, reports the Mirror.
Alarming statistics reveal that more than 40 percent, equating to a massive 22 million British adults, lack knowledge around the possibility of receiving an APR rate higher than advertised when applying for a credit card. A whopping 70 percent of polled individuals would be livid or distressed if they were presented with a higher APR than initially proposed; approximately 31 percent claimed such a situation would induce worry or disappointment.
It is mandatory for credit card lenders to inform applicants of the correct APR prior to agreement signing. Likewise, if changes to the rate are impending, typically a notification period of 30 days is provided in advance of these adjustments.
Escaping interest payments on your credit cards can be achieved by ensuring a complete payoff of your balance each month.
Alastair Douglas, CEO of TotallyMoney stated vehemently: “Now more than ever, people need to be able to take total control of their finances – and a big part of that is knowing where they stand when applying for credit. That includes knowing the level of interest you’ll be paying, the credit limit you’ll receive, and how long of a zero percent interest-free period you’ll get.”
He referenced lax regulations as he continued: “But for too long, regulation has allowed the banks to treat credit card applications as if they were a lottery – and to make things even more concerning, many people aren’t even aware they’re gambling with their finances. Lenders need to be upfront with customers about how products and services work, while ensuring they’re easily comparable. Key to that is making sure that what people see is what they’ll get.”
