Aussie Article : Hidden fees on 'unfair' credit cards

The amount of interest charged on a credit card can depend
on late fees and when the interest-free period ends.

Hidden fees on 'unfair' credit cards
AAP January 25, 2010 8:39AM

HIDDEN details about the interest charged on partly-paid or overdue credit card balances is unfairly costing customers, consumer advocate group Choice says.

A study of 20 credit card companies showed the amount of interest charged on a credit card can depend as much on when a provider stops and starts charging interest and how fairly they apply interest-free days as the actual advertised interest rate.

American Express, Bankwest, Commonwealth Bank, ANZ and Westpac were named as the the most unfair credit card providers.

"Many consumers would be surprised to learn they could have two cards with exactly the same interest rate and use them in the same way yet have one charging twice as much interest than the other if they pay late," Choice spokesman Christopher Azine said.

"The tricks of the trade make it much harder to compare the relative merits of different credit cards because the headline interest rate is only part of the story."

Most credit card companies backdate their interest to the date of the purchase if a repayment is late, Choice said, meaning just one day late can result in higher interest being charged retrospectively for up to 55 days.
Partial repayments are also unlikely to stop that backdating occurring, Choice said.

For example if a customer were to underpay a $2000 bill by just $10, the extra interest would still be charged on the whole $2000.

Fairer credit card providers, such as Bendigo Bank, Heritage Building Society, Teachers Credit Union and some GE cards, only charge interest on the shortfall, Choice said.

Mr Azine called on all credit card providers to use the same charging methods, and for customers to be aware of the finer details.

"It's a simple matter to tweak systems to employ fairer systems but while most customers don't understand the tricks they will inevitably continue," he said.


Summary :
The article talks about the hidden high interest charge on partly paid or overdue credit card balances. Choice spokesman Christopher Azine said that there is a possibility where the consumer who holds two cards with exactly the same interest rate had been charged twice as much interest than the other if it is overdue. This shows that the headline interest rate is only part of the story. Besides that, there will be a big charges for late payments, meaning just one day late can result in higher interest being charged retrospectively for up to 55 days. Partially repayments are also unlikely to avoid that backdating from happening. At last, Mr Azine urges all credit card providers to use the same charging methods, and for consumers to be aware of the details before signing up a credit card.

Critique:
From the article, it shows us that the headline charging interest rate in Australia is relatively high. It creates a financial burden for the consumers, especially for those who had wrongly paid the full payments of their credit cards . Besides that, the information provided is very tricky. The credit card providers might purposely hide the high headine interest rate from the consumers. Therefore, government should play a part in standardising the interest rate and carrying out stringent rules more often so that to keep the credit card providers on their toes.