The consumer organisation Which? has demanded that the Office of Fair Trading (OFT) investigates the way credit card providers charge interest.
Which? has made a "supercomplaint" to the OFT
Which? says the top 20 providers charge interest in 12 different ways, meaning a "lower" Annual Percentage Rate (APR) can be dearer than a "higher" one.
The APR is supposed to make it easier for consumers to compare credit deals.
Which? wants the OFT to standardise the system so that people can compare deals more accurately.
It found quoted rates of APR can vary according to whether interest is charged on interest, and whether there is an interest-free period.
Interest can also be charged from when the transaction is made, or when the transaction reaches the account.
This made it useless for making a valid comparison of costs, it said.
The organisation is one of a handful of consumer groups which can make a "super complaint", which then forces the OFT to investigate.
The OFT now has 90 days to respond to the complaint.
According to Which?'s estimates, if card users all had the most favourable formula applied to their borrowing then they would save about £400m a year in interest payments.
However the banking organisation Apacs claimed that standardisation would be to the detriment of customers.
Four card issuers are already planning to alter their calculation methods in the coming months, Which? said.
"People believe that APRs are a dependable way of comparing credit cards, but our research shows that APR cannot to be relied upon for true credit card comparisons," said Alena Kozakova of Which?
"Two people who have two different credit cards with the same APR, and who use their credit card in the same way, could be paying very different levels of interest," she added.
Pick and chose
According to Which? an APR applied to the same amount of spending can produce a different interest charge depending on whether
- an interest free period is offered or not
- interest is charged until the date of repayment in full or until the statement date before the cardholder repays the balance in full
- interest is calculated on a monthly or daily basis
- interest starts being charged from the date a purchase is made or the date it is posted to the account
- interest is charged until the day before a statement is produced, or until the day on which the statement is produced
- the balance includes interest charged on the previous month's statement
"You can reduce the APR but bump up the calculation method - and dupe the consumer," said Ms Kozakova.
But Apacs said that a standard calculation of the APR would remove an element of competition from the credit card market.
"There are a huge variety of cards on the market and some people prefer to have a lower APR but pay earlier, others might like a slightly higher APR but only want to pay interest on the amount left outstanding", he said.
Since 2002, customers' statements have included an estimate of the interest a cardholder will have to pay if they only make the minimum repayment.
But two years later the OFT's own research revealed that most credit card holders had no idea how much interest they were being changed for using their cards.
Later that year, under pressure from MPs, the banking industry introduced standard summary boxes on credit card advertising literature.
These now show, among other things, the APR and the length of time it would take to pay off debt if consumers made just the required minimum repayment.
However in October 2004 bank representatives, appearing before the Treasury select committee of MPs, admitted that customers might find the different ways of calculating credit card charges confusing.
For the past five years a number of consumer bodies, including Which?, have had the power to lodge a so-called "super complaint" with any regulator.
If that regulator thinks there is case to answer then it can decide to launch a full investigation in its own right.