Best Credit Card Rate
THE Department of Trade and Industry is to launch a stinging attack on the credit card industry for sending out millions of unsolicited credit card cheques every month to consumers without adequate warnings about charges.
CREDIT & LOAN TOOLS
* DEALER FINDER: Loans
* DEALER FINDER: Credit cards
* TiM LISTS: Best value credit cards
* GUIDES: Credit & loans
It is expected the DTI will demand clearer labelling of interest rates and fees as well as greater information about the way the cheques work. But it is expected to resist calls to outlaw the unsolicited mailing of cheques.
The DTI's report, which could be published as early as this week, is in response to fierce criticism of credit card cheques by the Treasury Select Committee, chaired by John McFall. In December 2003 the committee recommended clearer, standardised labelling of interest rates and charges on cheques. But in February last year, McFall attacked the card providers again, saying 'consumers deserve a better deal'.
Credit card cheques are often sent under the pretence of making it easier for people to pay bills. Some offer cardholders the chance to consolidate loans or other card debts on one card. The worst culprits entice borrowers by saying the cheques can be used for a dream holiday or home improvements.
But unless consumers read the small print they will be stung by interest rates far in excess of those on their credit card account. The cheques also have additional handling fees of up to 2.5%.
Most major credit card companies, including Barclaycard, Capital One and MBNA, regularly issue cheques to cardholders. Typical interest rates charged are about 21% (see above), almost five times higher than the rate at which the banks borrow from each other and about 40% higher than the typical rates on credit card borrowing.
Halifax, with 5.5m cardholders, has one of the highest charges - up to 22% - for cheques linked to its popular One credit card, which has a rate 15.9%. HSBC charges up to 22.4% on its cheques, though it does not send them out unsolicited.
Worryingly, recent research by online comparison service uSwitch shows that one in three credit cardholders does not know the interest rates charged on the cheques.
Worse still, cash drawn on a credit card cheque is usually treated as a cash advance and so interest racks up as soon as the cheque is processed.
Consumer lobby group Which? says it will be disappointed if the Government stops short of banning unsolicited cheques. Mike Naylor, principal researcher at the organisation, says: 'The issues with credit card cheques are as bad as ever. If consumers receive them in the post they should rip them up. They do not represent good value.
'If someone wants to use a cheque they should have to request it from their provider and be told the rates charged and the terms of use. With consumer debt at record levels, it is worrying that card companies are behaving so irresponsibly.'
Naylor adds: 'Which? would like to see interest rates and charges printed prominently on the cheques or the cheque stub so consumers are in no doubt how much the extra borrowing will cost.'
© 2006 Associated Newspapers Ltd
Best Credit Card Rate
posted by News at 3:59 AM
CREDIT & LOAN TOOLS
* DEALER FINDER: Loans
* DEALER FINDER: Credit cards
* TiM LISTS: Best value credit cards
* GUIDES: Credit & loans
It is expected the DTI will demand clearer labelling of interest rates and fees as well as greater information about the way the cheques work. But it is expected to resist calls to outlaw the unsolicited mailing of cheques.
The DTI's report, which could be published as early as this week, is in response to fierce criticism of credit card cheques by the Treasury Select Committee, chaired by John McFall. In December 2003 the committee recommended clearer, standardised labelling of interest rates and charges on cheques. But in February last year, McFall attacked the card providers again, saying 'consumers deserve a better deal'.
Credit card cheques are often sent under the pretence of making it easier for people to pay bills. Some offer cardholders the chance to consolidate loans or other card debts on one card. The worst culprits entice borrowers by saying the cheques can be used for a dream holiday or home improvements.
But unless consumers read the small print they will be stung by interest rates far in excess of those on their credit card account. The cheques also have additional handling fees of up to 2.5%.
Most major credit card companies, including Barclaycard, Capital One and MBNA, regularly issue cheques to cardholders. Typical interest rates charged are about 21% (see above), almost five times higher than the rate at which the banks borrow from each other and about 40% higher than the typical rates on credit card borrowing.
Halifax, with 5.5m cardholders, has one of the highest charges - up to 22% - for cheques linked to its popular One credit card, which has a rate 15.9%. HSBC charges up to 22.4% on its cheques, though it does not send them out unsolicited.
Worryingly, recent research by online comparison service uSwitch shows that one in three credit cardholders does not know the interest rates charged on the cheques.
Worse still, cash drawn on a credit card cheque is usually treated as a cash advance and so interest racks up as soon as the cheque is processed.
Consumer lobby group Which? says it will be disappointed if the Government stops short of banning unsolicited cheques. Mike Naylor, principal researcher at the organisation, says: 'The issues with credit card cheques are as bad as ever. If consumers receive them in the post they should rip them up. They do not represent good value.
'If someone wants to use a cheque they should have to request it from their provider and be told the rates charged and the terms of use. With consumer debt at record levels, it is worrying that card companies are behaving so irresponsibly.'
Naylor adds: 'Which? would like to see interest rates and charges printed prominently on the cheques or the cheque stub so consumers are in no doubt how much the extra borrowing will cost.'
© 2006 Associated Newspapers Ltd
Best Credit Card Rate
posted by News at 3:59 AM
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