The government is planning to ban the credit card industry practice of upping customers’ credit limits without a account holder request. Ministers also want to ban the unsolicited issuing of credit card cheques.
These moves are apparently intended to stop consumers running up huge card debts by reducing the temptation to spend.
The words ‘horse’, ’stable’ and ‘door’ spring to mind…
Around three million Barclaycard customers will see their card’s APR cut by between 2.5% and 5%, with an acknowledgment from the company that many people were facing difficult times. The lucky 3m will be the card provider’s lowest risk customers - a further 9m Barclaycard holders will not see any change.
Critics have pointed out that the credit card industry has thus far not passed on the reductions in the Bank of England Base Rate, but card issuers say that in this economy there is an increased risk of people defaulting, which has meant they have to keep average APRs high to cover the costs of bad debt.
It remains to be seen whether other card issuers follow Barclaycard’s lead - it would appear that egg plc certainly aren’t.
Some carriers of the Egg visa card have been hit with a swingeing hike in the APR of their card, with new rates of 26.9% reported on accounts that used to feature rates closer to 20%. This type of rate increase may seem strange in an age of plummeting interest rates, yet the true purpose of the hike is revealed later in the communication from the bank.
Politicians and consumer groups have expressed anger and outrage at high street stores which are accepting ‘credit vouchers’ which are repaid by borrowers at an annual percentage rate (APR) of 222%. This is a rate more than 10 times higher than a typical credit card.
Low-risk credit card holders are facing fees, credit limit cuts or even account closure as credit companies seek to cut costs and increase revenue.
Despite the recent fiasco over the ditching of 160,000 loyal customers, and the resulting bad press, Egg remains one of the most widely recognised credit card brands in the UK today. Even though nowadays it’s offering is less than spectacular, it is still a fairly popular card - in no small part to the widespread publicity it has received over the years just because of its name. After all, what blogger or journalist can resist showing off their writing prowess by producing a teeth-grindingly awful pun as the headline?
The Office of Fair Trading (OFT) has again criticised card card issuers for making their products too complicated and hard to compare. The chief complaint was that the way a card’s APR was calculated was done in 12 different ways among the top 20 card providers, effectively making APR meaningless as a comparison point when choosing a new card.
A senior MP has suggested that some credit card companies are withdrawing their services from people who keep their borrowing to a minimum, while generating hefty profits from those who borrow more recklessly. John McFall, chairman of the treasury select committee, said that if banks were canceling the accounts of reliable repayers while continuing to profit from those who ran up significant debts, then their business methods would ‘have to be called into question’.
New figures from payments association Apacs reveal a record high for spending on plastic, with a total of £321 billion spent in 2006.The amount includes £195 billion spent on credit cards, with the rest accounted for by debit cards which continue their strong rise in popularity.
Plastic now accounts for nearly a third of all payments made in the UK.
The Laura Ashley chain of fashion and furniture shops has been caught up in yet another unsolicited credit cards row after its storecard partner GE Capital sent out thousands of credit cards, and the PINs needed to use them, to the store’s customers without the prospective cardholder applying for them.