Credit card mistake made by millions of people – and it could cost you £100s

By Staff


Under current law, credit card companies with an advertised “representative APR” rate only have to apply this to 51% of applicants – this means 49% may end up with a higher rate

Millions of adults risk paying more in credit card interest because they’re unaware that they may not be granted the advertised rate.

Under current law, credit card companies with an advertised “representative APR” rate only have to apply this to 51% of applicants. This means the remaining 49% may end up with a higher rate – leaving them potentially paying hundreds of pounds more in interest, depending on how much they’ve borrowed.

Graham Hambleton, 68, who is retired and lives near Chichester in West Sussex, said he felt it was “easier” for him to accept a higher rate on his credit card rather than start another application. He said: “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.

“The advertised rate was 29% and I ended up accepting 34%. 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.”

New research from Capital One found some six million (11%) adults have applied for a credit card and then ended up with a higher interest rate – on average 14.9% more than the originally advertised APR. This means someone with a balance of £1,500 over 12 months paying an extra £223.50 interest.

More than 40% of British adults, 22 million people, are not aware that you could receive a much higher APR rate than what was advertised when applying for a credit card. Almost 70% of respondents would feel outraged or angry if they were offered a higher APR than what was offered, and around a third (31%) said it would make them worried or upset.

Credit card lenders must tell you what the APR is before you sign a new agreement. Similarly, if your rate is due to change, you should normally be given 30 days’ notice before your new interest is applied. You can avoid paying credit card interest by paying off your balance in full every month.

Alastair Douglas, CEO of TotallyMoney said: “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 0% interest-free period you’ll get.

“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.“

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