Study names unfair credit card companies

Hidden details about the interest charged on partly-paid or overdue credit card balances is unfairly costing customers, Australian consumer advocate group Choice says.

A study of 20 credit card companies across the Tasman showed the amount of interest charged on a credit card can depend as much on when a provider stops and starts charging interest and how fairly they apply interest-free days as the actual advertised interest rate.

American Express, Bankwest, Commonwealth Bank, ANZ and Westpac were named as the the most unfair credit card providers.

"Many consumers would be surprised to learn they could have two cards with exactly the same interest rate and use them in the same way yet have one charging twice as much interest than the other if they pay late," Choice spokesman Christopher Azine said.

"The tricks of the trade make it much harder to compare the relative merits of different credit cards because the headline interest rate is only part of the story."

Most credit card companies backdate their interest to the date of the purchase if a repayment is late, Choice said, meaning just one day late can result in higher interest being charged retrospectively for up to 55 days.

Partial repayments are also unlikely to stop that backdating occurring, Choice said.

For example if a customer were to underpay a US$2000 bill by just $10, the extra interest would still be charged on the whole $2000.

Fairer credit card providers, such as Bendigo Bank, Heritage Building Society, Teachers Credit Union and some GE cards, only charge interest on the shortfall, Choice said.

Azine called on all credit card providers to use the same charging methods, and for customers to be aware of the finer details.

"It's a simple matter to tweak systems to employ fairer systems but while most customers don't understand the tricks they will inevitably continue," he said.

Choice members were asked to share their experience and feelings about banks backdating interest. Here are some of the responses from Choice's website:

"We had paid what we thought was the full amount. For some strange reason, our payment was just slightly short and we were charged interest on the full amount. We ALWAYS pay off our card each month prior to the due date so as not to accrue any interest. We were shocked that we would be charged on the full amount for that month (in the thousands of dollars). Of course, there was nothing we could do - those were the rules." - Janet.

"After years of paying our credit card in full every month, we payed it three days late due to an oversight. NAB charged us $69.93 in interest - interest on all the purchases made that month plus each one made after the close of that month too. Never made that mistake again!" - Daniel.

My husband and I have had a Mastercard for a number of years and have always paid the full amount off every month. Unfortunately last month, due to an oversight, we were 3 days late in paying our December account of $4073.13 and were slugged a total of $147 interest for those 3 days! I rang to enquire as to why we'd been charged so much, to be told that we were charged interest for the overdue month's amount, plus interest on the current monthly amount as well, which had taken our overall account to $11,168.28. An expensive oversight! - Jill.

During one month, I have a credit card bill of $2300 roughly. I paid $2000 on time, then $300 just several days later. They charged me interests on the entire amount of $2300 instead of the overdue amount of $300. Grossly unfair. - Kelvin.

"The Banks need to be exposed for the greed and willingness to blatantly rob money from their customers. Let's make no mistake about this. After your 'Interest free period' expires on your Credit Card account, you get hit with interest for your 'Interest free period' ... there's your penalty, and then interest for every day after that ...why do the Banks need to charge a Late Fee??? They should be sending a Thank you note to customers who did not pay in time. And that's their 'Double Dipping Fee' ... they call it a 'Late Fee'.' - Mauro.

- AAP