The introduction of new Summary Boxes will make it much simpler to avoid credit cards with sneaky charges. But it's still up to us to make sure we use them properly.
Last week, APACS made a welcome announcement regarding credit card transparency. By the end of March 2004, a Summary Box (also referred to as an honesty box) containing standardised information will appear on credit card marketing literature. This follows other recent developments such as Chip and PIN, designed to cut credit card fraud, and notifying cardholders when introductory promotional interest rates come to an end (as of January 1 2004).
Typically, the Summary Box will contain the following information:
- APRs and other rates
- Monthly rates
- Interest free period
- Allocation of payments
- Minimum repayment
- Fees
- Charges
- Default charges
As well as making it easier to choose a card, the move will also help us keep track of any changes once a card has been taken out. That's because, if any of these details change, the cardholder will be notified. It's particularly pleasing to see this commitment as it will help address one of the main gripes consumers have with the financial services industry -- the practice of changing rates and other terms without adequate notification.
Another welcome inclusion is the information of allocation of payments. Some companies have been rather sneaky with the latest fad of charging 0% on balance transfers, allocating all payments to reducing your initial balance while charging interest rates in the high teens on any new purchases made. Other companies are much fairer, applying payments to balances incurring the highest interest rate first.
Credit (no pun intended) should also go to the Nationwide Building Society. They have been including their own Summary Box from October 1, a week before the industry's move was made official. Halifax also deserve an honourable mention for putting the Summary Box on monthly statements for their new Clear Card. It would be good to see this practice becoming standard on all statements, including those for savings and current accounts.
These measures won't solve the debt burden we're in. But at least it gives us most of the information we need to see just how expensive some cards can be. It's up to us to make sure we take advantage of that. One thing they don't illustrate is just how costly making the minimum monthly repayments can be in the long term -- take a look at this article for an illustration of how expensive this practice can be!
Find out how to get the best out your card in our credit card centre.
