Credit card rates 'mislead'

Credit card lenders are routinely misleading borrowers because the interest rates they charge are impossible to compare, the consumer group Which? warned yesterday. It said credit card charges were so complicated that a card with a lower interest rate could actually be more expensive than plastic charging a higher rate.

For example, borrowing £2,800 over a year on a credit card from internet bank Cahoot would cost £40 at an interest rate of 11.8 per cent. Yet the same debt on HSBC's standard credit card, with a rate of 13.9 per cent, would cost only £38 to service.

Which? warned the credit card industry calculated interest charges in 14 different ways. Some lenders begin charging interest as soon as you buy an item, while others wait until the money has gone out of their accounts. Some charge interest on interest accrued in previous months, while many lenders do not.

Which? said its investigations showed HSBC, Liverpool Victoria and Saga operated the fairest interest charging policies, while it criticised American Express, Cahoot, Halifax, MBNA, Mint, NatWest, Sainsbury's and Tesco.

A spokeswoman for Apacs, which represents the credit card industry, said lenders accepted that charges weren't always clear. "But I don't expect to see standardised interest rate calculations because that would require lenders to standardise products."