Credit card confusion for consumers

Posted by Ben Tumilty in Personal Finance on 24 January 2017 - Ben is a Credit Analyst at checkmyfile

Credit cards. Most of us have one, and getting your first one can feel like a massive step. We all see the adverts as well – “12 month’s interest-free on purchases”, “36 month balance transfer”, “18.9% interest rate”. They also advise spending carefully and regularly checking our statements. But do we stop to think about what any of this means?

Apparently not. According to research by comparison website MoneySupermarket, 64% of those surveyed check their credit card statements just once per month. Now that might be fine if you only use your card once per month, but for those of us who are regular credit card users this almost certainly isn’t enough. You could be racking up serious credit card balances and not even realising it.

Possibly even more concerning is the further revelation that we don’t know what any of the small print – or even the more common jargon mentioned on the adverts – actually means. 12% of the respondents didn’t understand what is meant by an “interest-free period”, and 1 in 10 were unsure about the term “minimum monthly repayment”.

Kevin Mountford from MoneySupermarket explains further, “Many people will use their credit card at this time of year which, if used wisely, can help spread out the cost of big purchases, offer protection on purchases and help improve your credit score. However, if used badly you could incur unnecessary charges, end up in debt and damage your financial reputation – making it harder to get credit in the future. It’s worth taking the time to get to grips with your credit card so you avoid a financial hangover in January.”

Similarly, the Co-operative Bank have published research showing that 20% of us who have used a 0% balance transfer credit card in the last 5 years have not met the terms of the offer, subsequently meaning that the offer has been withdrawn early. This error means that the consumer has to pay a higher interest rate as a result, costing them a collective £948m per year.

It’s not just 0% balance transfer offers, either – 37% of individuals having had a credit card with a promotional offer have had the offer removed, losing the offer on average within 5 months of receiving the deal.

And it’s not as if they would have realised, or were expecting it. 3 in 10 of were not aware that the lender could remove the deal should a payment be missed, and 31% didn’t realise exceeding their credit limit would invalidate the offer.

So what can we do, as consumers, to improve our awareness of how credit cards work? Obviously, reading all of the terms and conditions might seem a little much, bearing in mind how small the print often is.

But if you’re not sure of what something means, don’t be afraid to ask someone in your local branch. After all, it’s what they’re there for – they will be know that it can be a little confusing at times, so make use of all the benefits of being a customer.

If you’re looking for more independent advice – if you’re not yet a customer and are browsing, for example – then you may still get help in branch, but you may also want to look at someone such as Citizens Advice, or the Money Advice Service. They will be able to give impartial advice and help to break down the jargon.

Alternatively, feel free to check out our jargon buster section, where we provide definitions of a multitude of financial terms that you may come across in your applications for credit.

Check Your Multi-Agency Credit Report

30 Day Free Trial

How To Get The Best Car Finance Deals

New car sales may have slowed in recent years, with the economy, emissions scandals and Millennials all being cited as the root cause at one point or another. But the number of people choosing to use credit as a means of driving away in a new car continues to rise, according to figures from the Finance & Leasing Association which shows that the new car finance market grew by 15% in July 2018 when compared to the previous year.

Published on 8 Oct 2018 by Kiah Phillips

Full Article

We're Now More Likely To Be Borrowers Than Savers

UK Households are now more likely to be borrowers than savers, with savings at their lowest since 1963, according to a study by the Office for National Statistics. Households are increasingly borrowing more – by taking out loans, car finance, and mortgages – than they are collectively depositing into savings accounts.

Published on 5 Oct 2018 by Sam Griffin

Full Article

The Credit Crunch 10 Years On: What’s Changed?

For many people, especially the those lucky enough to not have been old enough to be directly affected, the economic downturn of 2007-2009 seems like a distant memory. The first iPhone had launched a mere two months before the recession hit, and since then they’ve rebooted the Spiderman film franchise not once, but twice. But more importantly, has enough time passed for the borrowing/lending market to revert to its old tricks?

Published on 26 Sep 2018 by Jamie Mackenzie Smith

Full Article

The Limitation Act 1980 and Debt Time limits

The majority of credit consumers believe that once a debt has been acquired, that debt will remain until the full balance has been cleared regardless of the length of time passed. This may not be the case though, thanks to a little-known piece of legislation known as the Limitation Act 1980.

Published on 19 Sep 2018 by Erika Bone

Full Article

UK Households More Likely to be Borrowers Than Savers

UK Households are now more likely to be borrowers than savers, with savings at their lowest since 1963, according to a study by the Office for National Statistics. Households are increasingly borrowing more – by taking out loans, mobile phones, car finance, and mortgages – than they are actively depositing into savings accounts.

Published on 3 Sep 2018 by Sam Griffin

Full Article

Wonga Administration: What it Means For You

On Thursday 30th August the payday lender Wonga filed for Administration, following a spike in compensation claims and increased pressure on the payday loans industry. This follows a steady decline in this form of lending since the FCA began introducing stricter regulations 2013 in the name of protecting consumers.

Published on 31 Aug 2018 by Jamie Mackenzie Smith

Full Article

How a Baby Name Can Affect Creditworthiness

A lot of preparation (and usually arguing) goes into choosing a baby name – books, ‘top 100’ lists, place names, family names – the list of possibilities is endless. The trouble is, most parents don’t give much thought to the long-term impact of the name they decide on, beyond checking to make sure it doesn’t sound ridiculous when paired with the last name or that when put into initials it doesn’t spell something unfortunate.

Published on 19 Aug 2018 by Jamie Mackenzie Smith

Full Article

The Advantages & Disadvantages of Store Cards

There are a number of reasons you might take out a store card: whether you’re just waiting in-line at the shop and find out you can save on today’s shopping or they offer the promise of making money in the future, these cards regularly find their way into wallets (or phones via an app). Most big retailers offer their own cards, which allow you to take your purchases home – often with a nice discount applied – without having to part with a penny at the till.

Published on 10 Jul 2018 by Tom Blandford

Full Article

What Happens To Your Credit Report When You Move Country?

Moving from one country to another results in a lot of changes and new things – a new place and culture, new job, new people and in some cases even a new language. However, one thing lots of people do not realise is that you will also be starting afresh when it comes to your Credit Report. Credit Reports and the information they contain are country-specific and do not follow you from one country to another.

Published on 27 Jun 2018 by Kirstie Day

Full Article

What To Do If You’re a Victim of Data Breach

Another day, another high-profile data breach, with the morning news bringing word of another leak of personal information that affects millions of consumers. This time it’s the turn of Dixons Carphone - the company behind PC World, Currys and Carphone Warehouse.

Published on 14 Jun 2018 by Jamie Mackenzie Smith

Full Article


We are rated number 1 for customer service on