Consumers Confused with Credit Directive
The new Consumer Credit Directive, to be launched at the beginning of February, obliges lenders to advertise more clearly the fees attached to the credit they offer consumers.
New research suggests consumers are more confused with this, and some admit they will be put off from taking out a credit card if advertised rates were much higher.
A study by uSwitch revealed that just one in ten consumers understand what the directive will mean, while 55 percent are not even aware of it.
A further three quarters do not understand the new representative APRs which could be much high and 60 percent would be put off from applying for credit if the rates were advertised as higher.
“By forcing suppliers to give greater prominence to the facts in any advertising, the directive should bring greater transparency to the personal finance market,” said Stefan Maryniak, uSwitch’s personal finance expert.
“The directive won’t solve every problem and we urge consumers to take this as a wake-up call to start taking control of their financial situation.”
The directive will make it obligatory for providers to display an APR that 51 percent its customers are offered, meaning that although it will not be personal to consumers it will be a fairer representation of the rate they are likely to get.
Person Finance Control: How can a prepaid card help?
The directive aims to help consumers gain more control over their finances as just one third currently know their credit rating and 44 percent have never checked it.
Budgeting is key to gaining control of your finances, as it prevents you from overspending so you do not become late with repaying debts or bills.
A prepaid card is a good aid to help you stick to this budget as it does not have an overdraft facility and it is a credit card that even those with a bad credit rating can purchase.
Phones 4 U have launched a new prepaid card - Escape card, this has a low application fee and can be used to make purchases online, in shops and to retrieve cash via an ATM.