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High-interest credit cards to give customers warning

01/05/2007

In a move which could help people avoid accumulating more debt, credit cards which carry large interest rates will have to inform customers about their potential financial perils.

Any card with an annual percentage rate that is more than 25 per cent will be required to print a warning on consumers` statements to let them know it could be costly to carry a balance.

In addition, the companies will have to explain other risks which could lead to debt, including payment protection insurance, interest payments and penalty charges.

The new rules are a result of the Competition Commission`s investigation into high interest rates on credit cards, which are often found on store cards belonging to a particular shop or chain.

Commenting on the decision, Rory Taylor, spokesman for the Competitions Commission, remarked: "We are trying to make it clear to people exactly what they are paying."

Recently, a study by consumer watchdog Which? revealed that many credit card providers calculate interest using up to 12 varying formulas, which means that a person could potentially rack up debt without realising it.

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