The CardCosts website (www.cardcosts.org.uk) is built on the findings of the research which concluded that consumers are struggling with the ‘APR’ as the traditional measure of illustrating the cost of borrowing.

Andrea Finney, Senior Research Fellow at the Personal Finance Research Centre, said: “One of the most striking findings to come out of our research was how strongly the people we spoke to wanted to understand the costs of their credit card in relation to their own spending.  A hypothetical balance, such as the one used for calculating the APR, simply wasn’t meaningful.  This new website was developed to give users the opportunity to see the cost of their cards as a direct reflection of their actual balance and how they use their card.

"The way that credit card costs are calculated and applied can be complicated enough, but when you add in the potential different combinations of types of balance and the many different approaches consumers can take to repay their cards, the picture becomes even more complex.  It’s extremely difficult for consumers to navigate this complexity on their own.  The key challenge in developing a tool like this therefore lay in stripping back this real-world complexity to make the interface as simple and intuitive to use as possible, while retaining the validity and representativeness of the results.”

The CardCosts website will allow credit cardholders to gain a better understanding of the cost of their current repayment choices; experiment with different levels of payments and desired periods to pay off a balance; learn from a range of informative messages which explain what can be complicated terms; link to other help and guidance, such as credit card statements and summary boxes; and quickly receive details of sources of free independent debt advice.

 The website looks to go further than other similar existing tools by capturing details of different types of balance – covering not only traditional card purchases but also balance transfers and cash advances.  Furthermore, it allows the user to clearly see the impact of paying just a little more than the minimum payment.  These enhanced features will ensure that the indicative costs provided are as tailored to a customer’s individual circumstances as possible.

The initiative has received support from the Department for Business, Innovation & Skills, where the Minister for Employment Relations, Consumer Affairs and Postal Services, Jo Swinson MP has welcomed the alignment of this work with its own ambitions around ‘consumer empowerment’.

Jo Swinson MP, Consumer Minister, said: "The Government is committed to helping consumers in financial difficulty.  A big part of managing financial problems and debt is knowing how to avoid them, and well-informed consumers make better choices and spending decisions.  That is why I am pleased that The UK Cards Association and Bristol University have launched the CardCosts website today, which I'm confident will be a welcome aid to consumers seeking more information on credit cards.

"This website will help consumers take control of their bills and pick the best credit card for their needs.  Consumers who are in financial difficulty can talk to the Money Advice Service on 0300 500 5000, who provide free and confidential debt advice."

View a short film of Jo Swinson and The UK Cards Association Cahir, Melanie Johnson discussing the new website.

About the research

The research consisted of three phases: Phase 1, completed in autumn 2011, undertook a thorough review of previous research and published literature in order to identify indications around consumers’ awareness and understanding of the APR in relation to credit cards.  Phase 2 comprised six qualitative focus groups, undertaken within the University in February 2012, where 46 individuals were selected based on criteria around age, income and reporting not being in financial difficulties.  A mix of men and women took part in the research.

The outcome of Phase 2 was unequivocally that consumers wanted to see expressions of cost that are tangible, rather than abstract.  The focus groups showed that costs expressed in pounds had the greatest impact on people’s understanding.  This had even greater resonance when related to the lifetime of the borrowing, whether driven by how much people could afford to repay, or a goal to clear the balance within a certain time.  Although people recognised the monthly interest accrued from their statements, they were struck when they saw how these could stack up over the course of the year.

The evidence gathered in the first two phases led to agreement between the PFRC, The UK Cards Association and its members that a new website would be the most efficient way to deliver the desired outcome for consumers.

The website was designed and developed by the University of Bristol IT Services R&D in partnership with PFRC and The UK Cards Association.  Consumer testing of the prototype was undertaken to informed the final design.

The development process for the new website included feedback from key stakeholder round-tables, involving Which?, the Money Advice Trust, Citizens Advice, AdviceUK, StepChange Debt Charity, Money Advice Scotland and with subsequent input from the Money Advice Service.

About the PFRC

The Personal Finance Research Centre (PFRC) at the University of Bristol is an independent social research centre which conducts high-quality, policy-focused research for a wide range of public, charitable and private organisations.  PFRC’s interdisciplinary team combines extensive quantitative and qualitative empirical research skills with a detailed understanding of a range of social policy issues.  Through its research, consultancy and advisory work, PFRC acts as a bridge between the academic and research community, the financial services industry, policymakers and other stakeholders.

About The UK Cards Association

The UK Cards Association is the leading trade association for the card payments industry in the UK.  With a membership that includes all major credit, debit and charge card issuers, and card payment acquirers, the Association advances industry best practice, contributes to the development of legislative and regulatory frameworks, and safeguards the integrity of card payments by tackling card fraud, developing industry standards and co-ordinating other industry-wide initiatives.