Credit card crack down

Chosing which credit card to use can be a minefield

The government is proposing to introduce a tough new set of measures to clean up the UK's credit card industry.

The new standards - known as CAT marks - aim to highlight credit card deals that offer reasonable value and do not have any catches hidden in the small print.

With borrowers spending a fifth more on credit cards than they have ever before, there is growing concern that many customers are signing up for credit without realising just how much they may have to pay back.

Some credit card lenders have been accused of maximising profits by allowing borrowers to pay back too little each month.

A simpler life

By proposing the CAT benchmark - setting standards for Charges, Access and Terms - the Treasury is hoping to make life simpler for consumers.

By looking for the CAT mark, consumers should be able to spot straightforward credit deals that do not carry a sting in the tail.

Banks may also come under the new standards

The Treasury also wants the new standards to be applied to bank current accounts.

It is notoriously difficult to decide which credit card to use since a simple comparison of interest rates can be misleading.

Interest rates for credit cards can vary enormously, with rates currently on offer ranging from about 8% to 23.1%.

But other terms and conditions attached to the credit cards may significantly alter the true amount of money that has to be paid by the customer.

Comparing interest

The CAT will not actually determine interest rates, or set a minimum and maximum level.

But the knowledge that a credit card company carries a Cat is designed to put customers at ease.

In December, the UK's Treasury granted the Office of Fair Trading (OFT) powers to regulate how banks run credit and debit card systems.

The Treasury estimates that the change in regulatory power will lead to overall savings of between £750m and £1.25bn per year for businesses and consumers.

The government's proposals are part of a consultation document that will be reviewed in April, and the Treasury welcomes the views of the public on this matter.