Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Business

Stumped by smallprint: credit card agreements are gobbledegook with calls for rules revamp

by April 5, 2023
April 5, 2023
Stumped by smallprint: credit card agreements are gobbledegook with calls for rules revamp

New research finds the majority of Brits are baffled by the most basic terms of their credit agreements, like how much interest they’ll be charged.

To protect consumers from being hoodwinked by credit providers, the Consumer Credit Act prescribes the information a company must give consumers before they sign a credit agreement. But these rules leave consumers lost in legalese, with just 2 in 5 consumers able to answer the most basic questions about a credit card they have just applied for.

The data comes from a new report by Fairer Finance, the independent consumer group, and commissioned by Klarna, the global payments and shopping service. To test the effectiveness of the current rules, Fairer Finance asked a nationally representative group of 30 people who either owned or were considering taking out a credit card to complete a mock online credit card application, which fully complied with current regulations. They then tested the group’s comprehension of the key terms of the credit card with a series of questions and conducted focus groups to draw out further insights.

The findings were startling. On average, just 2 in 5 participants could correctly answer the basic understanding questions. Not a single participant was able to answer the most difficult question (‘what is the fee for withdrawing cash overseas?’), while even the easiest question (‘does this credit card charge an annual fee?’) was answered correctly by just two-thirds of respondents.

A worrying number of participants failed to identify various fees associated with the credit card. 37% of participants either weren’t aware of the 2.9% balance transfer fee or thought there was no fee. 60% either weren’t aware of the 3% cash transaction fee or thought there was no fee. With a £1,000 balance transfer and £20 cash withdrawal, these fees would add up to £32.

Only 43% were able to identify the correct APR. This is an especially important number to keep track of, since if a borrower had a £1,000 balance and paid off £100 each month, on a card with 22.9% APR (the most common representative rate at the moment) they would pay £108 interest, while on a card with 34.9% APR (charged by many credit builder cards) they would pay £167 – a £59 difference.

James Daley, MD, Fairer Finance, commented: “Credit cards are complicated and we’ve long suspected that banks are not giving customers the information they need to understand them. Now we have the evidence to prove it.

“With the Consumer Credit Act under review, now is the perfect time to tear up the current regulations and start again. We need new rules which ensure customers are given the right information at the right time, to help them properly understand the benefits and risks of credit products.”

Alex Marsh, Head of Klarna UK, commented: “Klarna has always fought for the interests of the ordinary consumer and getting disclosure rules right is vital to having well-informed consumers. But the current rules don’t do that. They leave consumers confused and, ironically, pushes them towards expensive and higher-risk forms of credit. With BNPL regulation the government has a golden opportunity to be bold and create new rules to give consumers the right information at the right time so they can make informed decisions.”

Klarna and Fairer Finance plan to discuss their findings with MPs and debt charities in the coming weeks.

Read more:
Stumped by smallprint: credit card agreements are gobbledegook with calls for rules revamp

0
FacebookTwitterGoogle +Pinterest
previous post
Men still out-earn women in most jobs
next post
Amazon and Microsoft face referral to UK regulator over cloud services market

You may also like

Farcical loophole sees tax avoidance schemes removed from...

April 17, 2023

Ed Miliband launches state-backed offshore wind initiative

July 25, 2024

Budget 2024: Record £40bn tax hike set to...

October 30, 2024

What to Look for in a Top PHP...

May 15, 2024

How to Choose the Right Appetite Suppressant for...

December 19, 2024

Tesco Accused of Undercutting Local Shops Through Wholesale...

April 22, 2024

The Ripple Effect of Brexit Tax on UK’s...

June 17, 2023

HIX Writer Review: A Comprehensive Free AI Writing...

August 26, 2024

Founders who create safe environment for employees more...

May 23, 2023

Etsy’s new ban on sex toys and erotic...

July 7, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Trump ally stands firm against ‘big, beautiful bill’ despite pressure: ‘It’ll completely backfire’

      June 8, 2025
    • Rubio condemns assassination attempt on Colombian presidential candidate Miguel Uribe

      June 8, 2025
    • Obama WH physician says Biden doc should have performed cognitive test

      June 8, 2025
    • Trump warns of ‘serious consequences’ if Elon Musk funds Democrats

      June 7, 2025
    • Musk jokes about reconsidering stance on Big Beautiful Bill after Schiff’s praise

      June 7, 2025
    • Musk deletes explosive posts about Trump and Epstein files

      June 7, 2025

    Categories

    • Business (8,152)
    • Investing (2,019)
    • Politics (15,571)
    • Stocks (3,136)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved