OFT (UK) Examines Credit Card Cheques

Credit card cheques allow consumers to draw money from an existing credit card account using a cheque. But purchases with a credit card cheque can attract a higher interest rate than those made by card and there is often no interest free period as interest is charged as soon as the cheque is processed. Additional fees are also often charged for using a credit card cheque, typically 2 per cent of the value of the transaction.

Research shows that for many consumers these costs are unexpected. Consumer detriment from unanticipated interest charges and fees may be as high as £57 million a year. Consumers may also not be aware that items bought with a credit card cheque may have less protection under Section 75 of the Consumer Credit Act than a credit card purchase.

The OFT believes that the lack of good information given to consumers about credit card cheques and their associated costs is unacceptable. It wants the government to introduce legislation to ensure that consumers are provided with consistent, clear and timely information about the cheques and the cost of using them, at all relevant stages in a consumer's decision-making.

John Fingleton, OFT Chief Executive, said: 'Consumers need good quality information about the costs and other potential disadvantages of credit card cheques before they consider using them This isn't always happening and we urge the government to introduce legislation to protect consumers.'