Six out of ten credit card users don’t know how much interest they are paying

New research has revealed that six out of ten credit card users don’t know how much interest they are charged, according to Yougov research commissioned by Klarna.

In contrast, the research showed that consumers understand the headline terms and conditions of Buy Now Pay Later (BNPL) products better than they do credit cards. Having reviewed a Klarna BNPL check-out page, seven out of ten of respondents said it was clearer when they needed to repay, and only a quarter (26%) said it was clear when they needed to pay a credit card to avoid additional charges.

The research found that not a single respondent was able to correctly calculate how much a typical credit card purchase would cost after interest is taken into account.

The findings have led Klarna and Fairer Finance, a consumer-interest body, to today call on the industry to review disclosure rules for regulated finance.

Alex Marsh, Head of Klarna said “It is shocking that well over half of credit card users don’t know how much interest they are paying on their purchases.”

“It is vital that consumers understand the basic terms of their credit agreements, even more so at a time when household budgets are under massive pressure, and credit card companies are charging record-high interest rates.”

James Daley, Managing Director of Fairer Finance, said “Credit cards are incredibly complex products, with layers of different interest rates and charges. This latest research proves what we’ve long suspected – that the majority of customers struggle to understand exactly what they’re being charged. This situation is made worse by an out of date set of regulations, which force card companies to bombard customers with a range of jargon-filled documents and disclosures during the application process. The Consumer Credit Act and FCA regulations need to be urgently reviewed and replaced with more effective rules that ensure customers are given the information they need, at the right time, and in a format and language that they can understand.”