Your Money: Playing your cards right

The customer is coming up trumps in the credit card wars. About time, too

There can be no greater proof of the masochism permeating the relationship of Britons with financial-services providers than our attitude to credit cards. After all, given a choice of two cards, one charging upwards of 20 per cent APR on any sum owed, while the other levies a fee just half that amount, millions of us stick with the higher-charging option.

How else is it possible to explain why someone running a debt of pounds 1,000 over a 12-month period would prefer to pay upwards of pounds 180 in interest on that amount, as compared to pounds 120 with a card which is virtually as good? This is the choice facing someone with a card from the Barclaycard stable, which recently cut its rates to 19.9 per cent, or Capital One Bank, charging 11.9 per cent APR.

The evidence, however, is that growing numbers of us are prepared to give up our masochistic ways. In the past three years, upwards of two million new cards have been issued which undercut those on offer from our high-street banks.

This week, Direct Line - the neurotic-telephone-on-wheels financial- services supplier - entered the market with the launch of its own low-cost flexible friend. Its card will charge just 6.8 per cent APR in the first six months for both purchases and balance transfers, reverting thereafter to a reasonable 15.9 per cent APR.

Direct Line hopes to revitalise the credit card world with the first telecard, which it claims will be supported by a fast and efficient telephone service. But it is joining a tough and overcrowded market where dynamic plastic interlopers from the US have all but stolen the march on the sleeping giants of UK banking. Customers have been the big winners from these credit card wars. A flood of cheap deals starting at 6.9 per cent APR, from American card issuers like People's Bank of Connecticut, MBNA, HFC and Capital One, have sent Barclaycard's share of the market down from 32 to 28 per cent.

Nick Cobham, a director at the Credit Card Research Group, explains: "The credit card market in this country has changed over the past few years. Customers have switched from the traditional high-street banks, to the new American direct-mail issuers."

More bad news looms on the horizon. Morgan Stanley Dean Witter, which owns one of the US's most popular credit brands, the Discover Card, is creating a new power base in Cumbernauld, Scotland. Few doubt it will be used to launch some kind of European Discover operation, to expand its 40 million American card-base. And where the US prospers the Germans are quick to follow. Volkswagen is planning a multi-million-pound attack on the UK personal finance market, with a credit card as a central plank of its strategy.

But the traditional banks are fighting back. Sheer fright at an overnight haemorrhaging of accounts led Barclaycard, the UK's biggest issuer, to axe 1,100 employees. It has since relaunched its card with a new 19.9 per cent APR, still twice as high as many others. Lloyds, too, is unveiling a set of new cards, called the Lloyds TSB Asset Range, with lower interest rates and fewer annual fees.

The biggest dilemma for customers is knowing which card is right for them from the plethora of offers which fall daily through their letterboxes. Yet choosing is more simple than it seems, because credit card customers fall into two essential categories. About half pay off their bill every month, in which case the interest charge is irrelevant. They need to consider the size of any annual fee, and the whistles and flutes which come as part of the package.

Annual fees have been one of the happy casualties of the plastic war. One of Barclaycard's new features waives it if you spend more than pounds 2,000 a year.

On the incentives side, you can use your card to save towards discounts on anything from cars to flights with air miles, and take money off utility bills with British Gas's goldfish card. Barclaycard's new reward scheme gives rebates on gas, electricity and telephone bills.

Alliance & Leicester has gone one step further with its cashback card, a copy of the US's Discover card. It refunds 0.5 per cent of all purchases up to pounds 2,999.99 and 1 per cent thereafter.

But customers who borrow regularly should ignore all these frills and opt for the cheapest interest rate they can find - which, at the moment, will almost certainly be an introductory discount rate for a six-month period. The Nationwide card, for instance, charges 16.5 per cent APR with an introductory rate of 8.5 per cent; Tesco charges 14.9 per cent APR, discount rate 9.9 per cent.

You need to check the small print carefully, as some issuers only charge the lower introductory rate on outstanding balances transferred to the new card. Barclaycard, for example, charges 9.9 per cent APR on such balances but new purchases attract interest at the higher rates.

Smart shoppers can use these lower introductory rates to surf between cards. Even the very cheapest personal loans are twice as dear.

But it is not all good news for customers, because the sting in the tail of many of these cards lies with the "hidden" charges which can dilute some of the joy. Some issuers will levy a pounds 20 fee if your payment arrives a couple of days late, pounds 15 for exceeding your credit limit and other similar charges for routine administration.

And here Direct Line is among the offenders. It plans to levy a pounds 10 charge for late payment.


Lender Introductory Standard Annual Interest- Cost of borrowing Savings with

APR APR Fee Free Days (including annual fee) Direct Line Direct Line MasterCard 6.8% 15.9% nil 46 pounds 108.06 n/a

Debenhams Option Card n/a 3100.0% pounds .00 56 pounds 273.60 pounds 165.54

Woolwich Secured MasterCard n/a 21.00% pounds 12.00 45 pounds 223.20 pounds 115.14

Halifax Gold MasterCard n/a 17.90% pounds 20.00 56 pounds 185.60 pounds 77.54

MBNA MasterCard n/a 19.90% nil 59 pounds 183.60 pounds 75.54

Abbey National Visa n/a 17.90% pounds 9.50 49 pounds 183.50 pounds 75.44

Goldfish MasterCard/Visa n/a 19.80% nil 52 pounds 182.40 pounds 74.34

American Express Blue 9.90% 19.50% pounds 12.00 56 pounds 137.40 pounds 29.34

Sainsbury's Merit Visa 9.90% 14.90% nil 0 pounds 118.08 pounds 10.02

People's Bank MasterCard/Visa 6.90% 17.90% nil 56 pounds 116.40 pounds 8.34

Capital One Bank MasterCard n/a 11.90% nil 54 pounds 113.76 pounds 5.70

Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
Morrissey pictured in 2013
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookA wonderful selection of salads, starters and mains featuring venison, grouse and other game
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Robyn Lawley
i100  ... he was into holy war way before it was on trend
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Life and Style
lifeDon't get caught up on climaxing
Life and Style
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    1st line call logger/ User access administrator

    £9 Per Hour: Clearwater People Solutions Ltd: Our client based in Warrington a...

    Shine Night Walk 2014 - 'On the night' volunteer roles

    Unpaid Voluntary Work : Cancer Research UK: We need motivational volunteers to...

    Accounts Assistant (Accounts Payable & Accounts Receivable)

    £23000 - £25000 per annum: Ashdown Group: Accounts Assistant (Accounts Payable...

    Senior IT Trainer - Buckinghamshire - £250 - £350 p/d

    £200 - £300 per day: Ashdown Group: IT Trainer - Marlow, Buckinghamshire - £25...

    Day In a Page

    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices
    Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

    Could smartphones soon be diagnosing diseases?

    Health Kit and Google Fit have been described as "the beginning of a health revolution"
    Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

    Can we learn to love Ryanair again?

    Four recent travellers give their verdicts on the carrier's improved customer service
    Billionaire founder of Spanx launches range of jeans that offers

    Spanx launches range of jeans

    The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
    10 best over-ear headphones

    Aural pleasure: 10 best over-ear headphones

    Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
    Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

    Commonwealth Games

    David Millar ready to serve up gold for his beloved Scotland in the end
    UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

    UCI Mountain Bike World Cup

    Downhill all the way to the top for the Atherton siblings
    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain
    Ebola epidemic: Plagued by fear

    Ebola epidemic: Plagued by fear

    How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
    Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

    From 'Parks and Recreation' to 'Guardians of the Galaxy'

    He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star