But when it comes to making a decision about borrowing to buy a new hi-fi, the APR fails to give an accurate picture of the relative merits of an overdraft, personal loan or credit card borrowing.
Sir Bryan Carsberg, director-general of the Office of Fair Trading, wants to separate out the running interest costs from the fixed charges. The idea is to evaluate properly the cost of each borrowing decision. The fee for a credit card, for instance, will have already been paid by those contemplating using their cards for credit.
The Consumers' Association believes the initiative will muddy the waters. Greater efforts should be made to make the cost of different forms of borrowing comparable, it believes. Transparency is always preferable, however, and it is surely better to have two numbers that reflect the truth than a single misleading one. It is hardly beyond the wit of consumers to be able to cope with that.Reuse content