Cardeo has called for a major reform of the credit card market. It says the cost-of-living crisis is pushing millions of people deeper into credit card poverty as they are postponing debt repayments while struggling to pay everyday bills.

Cardeo is an app which combines open banking data with artificial intelligence. It aims to help people pay less interest on their credit cards with no fees, enabling them to pay off their credit cards more quickly and reduce overall cost.

The firm’s chief executive Gavin Shuker says that unless the Financial Conduct Authority (FCA) pushes major lenders to be much better at enabling customers to switch providers, customers will continue to pay more interest than they need to.

He is calling for customers to be given greater access to real-time data through open banking which would enable them to find products more suited to their needs and potentially reduce their debt.

Cardeo’s report ‘UK Credit Cards: How to fix a badly broken market’  looks at how the UK’s credit card market operates.

Shuker said: “The credit card poverty trap is catching more people as they struggle with the rising cost of living. It is no surprise that customers are neglecting to pay off high interest credit cards especially when the system doesn’t encourage them but as their available income is squeezed, the reality is that paying off credit card debit more effectively becomes even more important.

“Our analysis suggests that as many as 14 million people could now be paying close to £1,000 in interest every year – that’s storing up a huge debt problems for millions of people and the country as a whole.”

Cardeo found that almost 20% of UK credit card customers missed a credit card in the first half of 2022 due to the rising cost of living, incurring overdue payment fees and interest charges.

Five recommendations for the credit card market

Cardeo is calling for five key changes from Government and regulators, which it says will make the credit card market fairer for consumers.

First, it wants the FCA to reform the Consumer Credit Act to put customers in control of their own credit card data. It is also calling on banks and credit card firms to fully comply with the full requirements of the payments regulations.

Another suggestion is to make the ‘Open Banking Implementation Entity’ properly accountable to Parliament and ensure the benefits of open banking are made fully available to consumers.

It also wants the government to force banks and credit card firms to provide certain data electronically.

Cardeo says its report, which was launched in the House of Commons, shows that the credit card market in the UK continues to be “opaque” and “conceals or makes hard to understand customer data” that would be crucial to develop a repayment strategy or to switch to an alternative form of finance.