ESSENTIAL GUIDE TO MONEY: Stay on top of card rules as Consumer Credit Directive kicks in
Stay on top of credit card rules to ensure you don’t get caught out by clever tactics, says personal finance writer ED FOSS.
THE very dry sounding Consumer Credit Directive kicked in this week, although it has been on the way for some time. And only a minority of people knew it was coming.
It has been designed with card users in mind and to create a level playing field.
One of the steps credit providers will be forced into taking is to display the annual percentage rate (APR) that the majority of customers — in other words 51 per cent or more — are offered. This is called the representative APR and is a different figure to what you currently see.
But instead of making things clearer, this might actually add to the confusion, with three-quarters of consumers saying they don’t understand what the word ‘representative’ means in this context, according to the comparison and switching service Uswitch.com.
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The same folk at Uswitch reveal that 55 per cent of people are “completely oblivious” to the changes ahead.
Industry commentators also reckon a new set of charges will help offset the costs incurred to credit providers of another new directive rule — customers will now be automatically paying off their most expensive debts first, rather than their cheapest, which will reduce a customer’s debt more quickly.
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This looks set to cost the providers hundreds of millions of pounds. As a result, the chances of penalty charges being introduced for card inactivity could become a real issue as providers attempt to recoup some of this lost income.
At the very least make sure you know the rules governing your own card. Are there inactivity fees? If so, ditch the card or at least manage it so the fee doesn’t hit you, it shouldn’t be that hard.
If you don’t understand how your credit card works, read the small print. It might be dull, but it could save you serious problems in the future.