David Prosser: Let's bounce these cheques for good
Saturday 04 March 2006
So, the Office of Fair Trading wants new laws that will force lenders to be much clearer about the charges they make for credit-card cheques. I've got a better idea. Just ban this grubby little money-making scheme altogether.
For the uninitiated, credit card cheques are the payment slips many lenders routinely send out to customers. You can use them in the same way as conventional cheques, to pay for goods and services, but the money comes out of your credit card account, rather than from your bank.
Naturally, there's a catch (several catches, in fact). Above all, spending on credit-card cheques does not usually qualify for an interest-free period - you start paying charges on the money borrowed as soon as you write the cheque.
In addition, the interest rate is often higher on this borrowing than it would be on plastic spending, and there may even be extra administration charges. Plus, purchases using credit card cheques don't automatically qualify for consumer protection rights, as those using a credit card do.
The OFT says borrowers often don't know about these drawbacks. The regulator is also concerned that many lenders send out credit-card cheques automatically to borrowers, even if they haven't asked for them.
However, Apacs, the trade association of credit-card lenders, claims credit card cheques are valuable for two reasons. First, it says, they're a handy way to make balance transfers between cards - you can write a cheque to the card lender charging you a more expensive rate in order to move this debt on to your cheaper plastic. Second, they can be useful in emergencies - to pay a plumber, say, who won't take plastic.
Pull the other one. Are lenders really suggesting that they send out millions of these cheques just in case their customers have a plumbing emergency or need to move debt between credit card accounts? The latter justification is particularly laughable, given that all lenders make it very easy for you to move money to them from their rivals.
This is a straightforward scam. Credit card lenders, increasingly worried about the cost of 0 per cent deals and the other gimmicks they must now offer to compete, have simply come up with yet another ruse to screw money out of their customers. It is sneaky and utterly indefensible.
Why waste time trying to force lenders to be more responsible? Let's just ban these cheques altogether.
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