Consumer advocacy group Choice claims the manner in which some credit card companies charge interest on overdue or partial payments is unfair.

“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,” said Christopher Azine, representing the group.

Although the rate is important in calculating interest charges, other factors such as the amount of repayment due and the length of time over which the interest is calculated, also affect the total amount of interest charged. When calculating interest on late payments, some credit card companies backdate the charges to when the purchase was made, not the number of days the payment is late. For accounts with 55-day interest free grace periods, that’s a lot of days.

Also, with some credit cards, a partial payment is the same as no payment at all. The Choice study of 20 cards showed that interest is likely to be charged on the full amount due, not on the amount remaining unpaid. Underpaying a $500 credit card bill by $5 means interest may be charged on the entire $500, backdated to when the purchase was made.

“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,” said Mr. Azine. “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.”

Source: http://www.smh.com.au