Credit cards drop freebies to claw back profits
Saturday 05 February 2005
Credit Card companies are increasingly withdrawing their free add-on extras such as travel and purchase-protection insurance, according to
www.moneysupermarket.com, the financial-services comparison website, in a bid to claw back profits in an increasingly competitive market.
Credit Card companies are increasingly withdrawing their free add-on extras such as travel and purchase-protection insurance, according to www.moneysupermarket.com, the financial-services comparison website, in a bid to claw back profits in an increasingly competitive market.
With many credit cards now offering extended interest-free periods of up to 12 months, and much lower standard rates than ever before, the last few months has seen many providers withdrawing some of the traditional free extras. Barclaycard, HSBC, Halifax and Lloyds TSB are among a string of providers who have scrapped free-insurance offers for their credit-card customers in recent months, to focus on competing on price.
Stuart Glendinning, the director of credit cards at www.moneysupermarket.com, blames the recent introduction of new regulations governing insurance sales for the withdrawal of free insurance products. "For the 77 per cent of consumers who pay off their balance in full each month, the free perks that credit cards offer can prove very attractive," he says. "The withdrawal of these fringe benefits by some leading card providers is a disappointment, and evidence of well-intentioned regulation having an adverse impact on consumer choice.
"I believe that the withdrawal of free insurance perks on credit cards, as well as other types of financial products, such as current accounts, is likely to be a growing trend hereon in, with many other providers following suit." Credit-card companies have also been cutting back on perks such as cashback. Most recently, Alliance & Leicester announced that it was axing its money-back deal, which gives customers 0.5 per cent cashback on their purchases.
Mr Glendinning continues: "As the cost of insurance regulation hits card-providers, and many choose to withdraw the perks, consumers should check that they are getting the best package from their provider. New customers may wish to consider other types of rewarding credit cards, such as those offering cashback or reward points, while existing customers should check their contract and be careful not to rely on any insurance cover that has previously been given."
He adds that the days of 0 per cent deals for balance transfers and purchases may also be numbered. An increasing number of providers have started introducing fees on balance transfers to recoup some of their losses.
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