A recent interim report from the Financial Conduct Authority found most of us (65%) find credit cards fairly easy to understand, but around one in eight people admit they’re struggling.
But, digging below the surface shows that many consumers don’t understand cards as well as they think they do. Half of panellists in the FCA’s study didn’t know the annual percentage rate (APR) on their card, and a similar number of people who use their cards abroad have no idea what fees they pay to do so.
Some credit card users are less likely to understand their cards than most – particularly those who consistently have an outstanding balance, or are using a card that claims to help rebuild a credit rating.
That can lead to problems – customers who don’t know their credit limits run the risk of overspending, which can cost a small fortune if it means you get booted off a 0% balance transfer deal.
Only 59% of people can correctly answer the following true or false questions about 0% balance transfer cards according to the FCA. 22% got one question wrong, and 19% made two or more mistakes.
Can you do better?
1. True or false – 0% balance transfer cards can be used to transfer debt from an existing credit card to a new credit card.
2. True or false – Interest will never be charged on a debt transferred to a 0% deal.
3. True or false – A fee is typically charged to transfer the balance.
4. True or false – After the introductory period, interest is charged on the debt that is transferred and has not been paid off.
Answers: 1. True, 2. False (you could be charged interest if you don’t clear the balance in time, make a late payment, go over your credit limit), 3. True (You normally need to pay a fee of 2%-3% to switch to a 0% balance transfer deal, but a handful of cards offer fee-free deals), 4. True.