Store cards are a rip-off, the government's consumer watchdog has claimed today.

In a new report, the Competition Commission has warned that customers are being overcharged to the tune of £100 million per year through uncompetitive interest rates.

That the credit card industry is able to get away with this, the report goes on, is due to a shocking lack of consumer awareness about APR rates on borrowing.

"People, it seems, are genuinely ignorant about the rates they are signing up to when they take out a store card", a spokesperson for the Competition Commission told the BBC, following publication of the report.

With around 12 million store cards held by Brits, this is big business. Alongside real interest rates often 10 per cent higher than on conventional credit cards, many shoppers unwittingly take out insurance on the cards – reeling in even more cash for the companies.

"Consumers' sensitivity to APR levels and other charges is low", Competition Commission deputy chair Christopher Clarke stated.

But how surprising is this? APR, short for "Annual Percentage Rate of the Total Charge for Credit" is a rather complex concept, and one of dubious value.

It was introduced by the Consumer Credit Act 1974, as a tool to permit consumers to compare credit deals, but today's report casts doubt on its value.

One weakness is that APR excludes many of the one-off fees that accompany credit agreements. Indeed, the precise sums repayable and interest rates charged are often affected by specific terms and conditions stated in the agreement, widening the gap between APR and what you actually pay.

Secondly, APR is affected by the "compound interest" effect, which as thousands of mathematically-challenged Britons will tell you, is rather confusing. As such, the actual interest rate paid frequently varies, as repayments reduce – or fail to reduce – the initially-borrowed sum upon which interest is payable.

Typical store card APRs frequently hit 30 per cent, compared to around 15 to 20 per cent for credit cards.

The Competition Commission puts this down to a lack of competitive pressures, as well as consumer confusion.

With the structure of the store card industry unlikely to change soon – it is dominated by around six big players, notably GE Consumer Finance – the Competition Commission is pinning its short-term hopes on getting the public up to speed.

"If we raise the level of consumer knowledge then competition will improve and APRs, which are too high, should fall", a spokesperson argued.

The report – which is an interim announcement of conclusions reached since the Commission's inquiry began last March – points to a number of remedies, including APR warnings on the bottom of store card statements, the more prominent advice regarding direct debits, and the separation of offers for payment, purchase and price protection insurance.

The industry, however, is indignant at the Competition Commission's complaints.

Ashley Holmes, head of legal affairs at industry body, the Finance and Leasing Association, insisted that things are already changing: "We are now seeing lower store card APRs, the move to store-branded credit cards and greater consumer transparency."