Consumers were warned yesterday of the dangers of being lured into a "credit card honey trap".

Credit card providers are using the offer of low introductory interest rates to tempt consumers to transfer their outstanding debts, according to research.

But financial research firm Defaqto said after an average of five to six months, these incentive rates reverted to the standard APR, which could be as high as 20.8 per cent.

Gary Hooper, author of the report and head of banking at Defaqto, said: "Consumers need to control their spending or risk falling into the credit card honey trap.

"Credit card companies rely on headline rates to entice new consumers with promises of free money. But cardholders need to look beyond the standard APR to the fine print."

About 86 per cent of credit cards offer people a reduced introductory rate if they transfer their balance to the new card, with a third offering 0 per cent APR, the research showed.

The group, which analysed the rates and charges of 150 cards from 60 different providers, also found the prestige of having a gold or platinum card did not necessary translate into a better interest rate.

It found that out of the top five per cent of cards in terms of rates, just six were platinum cards and three were gold cards, while the remaining nine were standard cards.

According to the research, the lowest standard APR available at the end of September was 7.8 per cent on the Co-operative Bank's gold card and Northern Rock's base rate tracker card.

Interest rates charged for cash borrowed through a credit card ranged from 8.6 per cent on Northern Rock's base rate tracker card, to 24.9 per cent on Capital One's Premier card.

The report said while most cards offered an interest free period on purchases for 54 days, a handful offered no interest free period at all, including Lloyds TSB's Advance Credit Card, which offered a lower APR instead.

Only six out of the 150 cards analysed charged an annual fee, ranging from £20 to £40, although Cahoot gave borrowers the option of paying one in return for a lower interest rate for the life of the card.

About three-quarters of the cards looked at charged a fee of 2.75 per cent transaction for using the card abroad, with only a handful not levying a charge.

The report comes days after credit card providers were criticised by the Treasury Select Committee for a lack of transparency, and were urged to find a standard way of calculating APRs.

Tuesday October 21, 2003