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Credit card users warned about hidden charges

Consumers lured by competitive credit card interest rates offered by smaller banks have been warned to watch out for hidden charges.

The advice follows a Consumer Council study that compared 26 providers of credit and charge cards, taking into consideration variations in interest rates and fees.

According to the survey, published in the watchdog's Choice magazine, the Bank of China, Asia Commercial and Wing Lung banks offer customers a one-month interest-free period, with introductory rates as low as 7.7 per cent, whereas other banks tend to charge interest of up to 30 per cent from the date a purchase is made.

Larry Kwok Lam-kwong, the vice-chairman of the Consumer Council's publicity and community relations committee, urged people to exercise caution.

'Credit cards with lower interest rates are not without strings attached,' he said.

'In the event that card-holders are behind in minimum monthly payments, they stand to be charged a considerably higher interest rate of up to 36 per cent.

'With most credit card rates still high, consumers are urged to make every effort to use cards prudently and read the fine print to avoid sinking into prolonged debt - or even bankruptcy.'

The Consumer Council advises taking out two credit cards and rotating them during the month to extend the interest-free period for up to 60 days.

The survey found that on the basis of a 30 per cent yearly interest rate, a consumer who owes $50,000 and repays only the minimum required sum of five per cent of the outstanding balance each month would take 15 years to repay the debt plus $49,400 in interest it would attract.

Mr Kwok said that while lower interest charges for credit cards closely matched rates for personal loans, they did not make them more cost-effective.

The cost of using credit cards for cash advances was even higher, the survey found.

In some cases, cash advances attract a handling fee of 2.5 to five per cent of the advance amount, plus a fixed charge of $10 to $70.

Interest accrues daily and consumers failing to make payments on time may also incur a late-payment charge and a higher interest rate.

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