A complement to the APR - the CardCosts consumer webtool

The Annual Percentage Rate of Charge (APR) is intended to provide consumers with a standardised indication of the total cost of a consumer credit product. However, while APRs have an important role to enable consumers to compare costs across similar types of products, it is clear that they work best for larger sums borrowed in fixed-term credit. Concerns have been expressed by the industry, regulator and consumer groups alike in the UK about the usefulness of the APR as an indicator of the total cost of credit for some types of credit in particular, including in relation to credit cards.

This collaborative project was commissioned in response to these concerns. It aimed to improve understanding of how card users think about and understand the costs of their credit card use, what they want to know about these costs, and how they want information about costs presented. Based on this, the project aimed to develop a complement to the APR to communicate more clearly the cost to the consumer of credit card borrowing.

The project involved three phases:

• Conceptualisation of the problem, involving: an extensive review of UK and international evidence; and the development of principles for subsequent stages of the research, including the need to focus primarily on communicating the costs of borrowing on credit cards post-purchase via a simple, but representative, interactive tool.
• Testing concepts and consumer needs, involving: six focus groups with credit card borrowers exploring the cost information borrowers used and the sources of these, gaps in information provision, and how best these gaps might be filled by a new interactive tool.
• Development of a new online tool, involving: user-centred prototype design, field-testing and development of the final design.

The research concluded that credit card users struggle with the APR as the standardised illustration of the cost of borrowing and would benefit greatly from more tangible, £/p, expressions of cost that are  also tailored to their own card use. CardCosts, hosted by the UK Cards Association, was designed and developed to address these needs, giving users the opportunity to see the cost of their cards as a direct reflection of their actual balance and how they use their card. In addition, it enables users to experiment with different payment levels and patterns and illustrate the impact of these on those costs, and directs those who need more general information or debt advice to appropriate sources.

 The research elements of this project were undertaken by the Personal Finance Research Centre and the online tool was designed and developed by University of Bristol IT Services R&D/ILRT in partnership with the Personal Finance Research Centre and The UK Cards Association.

A complement to the APR - the CardCosts consumer webtool (project summary and research findings) (PDF, 435kB)
The UK Cards Association launches new online credit card tool - CardCosts (Link to YouTube video discussing the launch of the CardCosts online tool)

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