Consumers 'need to understand credit card interest'

Knowing how companies charge interest on credit cards will help those needing some extra money to avoid paying over the odds for it.

That is according to consumer watchdog Choice, which claimed that some card providers are not being fair about the interest they charge, while others do not clearly show how customers can avoid large fees.

According to the Sydney Morning Herald, Choice believes that backdating interest to the date the credit card was taken out, ignoring attempts to partially pay bills and cancelling interest-free periods when repayments are not met are ways in which banks are being unfair.

"For being one day late you could be charged retrospective daily interest on all transactions for up to 55 days," the organisation told the newspaper.

RBA assistant governor Malcolm Edey recently said that the bank had not made a decision on whether more competition or direct regulation is needed to reduce credit card fees.

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