Consumers Thrown into Hit-or-Miss Credit Card Lottery, Latest Figures Reveal

Regulations say only 51% of people must get the rate shown — while the other 49% may get stung on interest rate, offer duration, and credit limit. Recent figures from a survey by TotallyMoney show:

  • 11% got a higher interest rate on their card than shown when they applied
  • Lenders down sell headline balance transfer or purchase offers by up to 12 months
  • On average, consumers are offered a seven-month shorter 0% offer period than advertised
  • 1 in 10 people got a shorter-than-advertised 0% offer
  • Losses of up to £256 when customers given a seven-month shorter 0% offer period with a £2,000 balance

Recent figures from a survey by Moneycomms show that consumers are often being tripped up at the final hurdle of their credit card application.

Customers could end up with a 0% balance transfer or purchase offer reduced by up to a year, or get an APR (annual percentage rate) nearly 10% higher than advertised.

Used properly, credit cards can help consumers get on top of their finances — transfer a balance, get access to cash, or cut the cost of a big or unexpected purchase. But all this uncertainty, on top of the risk of not even being accepted in the first place, makes it a monetary minefield.

Risk-based pricing, a method used to assess the risk of lending to certain individuals, is common practice by most lenders. However, it’s not common knowledge and can lead to poorly managed consumer expectation.

Alastair Douglas, CEO of credit experts TotallyMoney, comments on the latest research from Moneycomms, revealing the difference between advertised credit card deals and what the customer sometimes gets.

Douglas warned: “Lenders are not always clear enough when advertising rates. Only 59% of cards let consumers know that risk-based pricing will be used to make the lender’s decision — and even when they do, it’s not all too clear.

“Some customers will be offered a very different product. A 29-month 0% balance transfer deal could be slashed to just 16 months, and the 27.4% APR advertised balance transfer rate could be hiked to 59.9% APR.

“One way to ensure you get the advertised offer or rate is to apply for a card you’re pre-approved for — which you can check with TotallyMoney. Pre-approved means you’ll get the deal, providing you pass the lender’s fraud and identity checks, and that the information that you provide is correct.

“Otherwise, it’s hit and miss for card applicants, and it doesn’t help customers who are choosing the length of 0% deals for a specific purpose to suit their budget.”

Andrew Hagger personal finance expert from Moneycomms, who carried out the research, said: “It’s frustrating for customers to get a watered-down deal and the financial consequences only makes matters worse.

“If a borrower gets their 0% duration cut by the average 7 months, on a £2,000 balance, the shorter interest-free intro offer could cost them up to £256 in that time.

“From a customer perspective, it’s a bit of a lottery and being short-changed on a 0% balance transfer or purchase deal can play havoc with their financial budgeting.”