'Excessive charges' on store cards denied

By Paul Lewis
BBC Radio 4's Money Box

The report called for a single method of calculating APR

The UK's biggest store card company has reacted strongly to complaints it charges excessive interest rates.

GE Consumer Finance runs 20 store cards for high street chains such as BHS, Mothercare, and Monsoon.

Responding to criticisms from MPs in a report on credit card charges, Director of Marketing Najlaa Taqi-eddin told BBC Radio 4's Money Box programme:

"I would actually let the customer be the judge. Five million are using our store cards on an ongoing basis and they are telling us they find the products easy to understand, and easy to use."

We have also found - in store cards in particular - excessive interest rates John McFall, Treasury Select Committee Chairman

Chairman of the Treasury Select Committee John McFall said consumers will spend £13 billion on credit cards this Christmas, but he also warned:

"This is a complex and opaque industry with some dubious marketing practices.

"The consumer cannot find the best deal because there are up to 11 different methods of calculating interest.

"We have also found - in store cards in particular - excessive interest rates."

Store cards do charge among the highest rates of interest - ranging between 26.8% and 29.9% - and even higher for customers who do not pay their monthly bill by direct debit.

Calculating interest

Ms Taqi-eddin said interest rates were not the main issue:

"They are often using it to buy small value items and if they keep a balance - which only 50% of our customers do at any point in time - they are keeping it for a very small time, and then paying it back."

But Mike Naylor, Senior Researcher at Which? magazine was not convinced. He said:

"Store card interest rates are extremely high, and considerably more expensive than even the most expensive credit cards.

"Our advice is not to use store cards, or if you do take the initial 10% discount... pay it off and cut it up. Use a cheaper credit card instead."

We want interest rates to be standardised Mike Naylor, Which? magazine

But finding the lowest rate of interest can be difficult.

Work carried out for the select committee established there were 11 different ways of calculating the standard Annual Percentage Rate (APR), universally used to measure the interest charged on a card.

For example, a shopper spending £300 on a card which is quoted as charging 18.9% APR could find the interest charged over two months varied from £5.50 to £9.54 depending on how the credit card company calculated it.

Mike Naylor shares the committee's view that reform is urgently needed. He told the programme:

"Consumers cannot compare one card with another. We want interest rates to be standardised so they can.

"This was a damning report. The industry must take some real steps to improve transparency, improve the lot of consumers, and stop fleecing them."

BBC Radio 4's Money Box was broadcast on Saturday, 20 December, 2003.

The programme was repeated on Sunday, 21 December, 2003, at 2102 GMT.