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APR confusion `could lead to debt problems`

02/04/2007

People with high levels of credit card debt may be suffering from misleading interest rates, according to new research.

A study by consumer watchdog Which? found that the top 20 credit card providers calculate interest using 12 different formulas.

This means that a consumer could potentially be paying more interest on a card with a lower annual percentage rate (APR) and inadvertently racking up debt, the organisation warns.

"Our research shows that APR cannot be relied upon for true credit card comparisons," said Alena Kozakova, principal economist at Which?.

"Two people who have two different credit cards with the same APR and who use their credit card in the same way, could be paying very different levels of interest."

Which? has called upon the Office of Fair Trading to investigate and standardise APR calculation by high street lenders.

Last week, figures from MoneyExpert revealed that as many as 2.8 million Britons had their credit card applications refused in the past six months.

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