The Office of Fair Trading is to consider new legislation to try to protect consumers from difficulties associated with 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% of the value of the transaction.

The OFT believes that the detriment to consumers could be as high as £57 million per 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. New legislation will be targeted to improve information given to consumers including:

• how the use of credit card cheques differs from the use of a credit card, for example when such cheques are treated as cash advances rather than purchases
• the interest rate that applies and whether this differs from the rate charged for card purchases
• when interest is charged and that there is no interest free period (if that is the case)
• whether additional fees or charges apply and how much
• whether purchases using a credit card cheque benefit from the same protection as using a credit card.

John Fingleton, OFT Chief Executive, commented:

'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'