Julian Knight: If cards are fair, it doesn't mean they'll be cheap

A new set of 'principles' will give credit customers more notice of interest rate changes, but their finances will still feel the pain

Credit card firms have signed up to a set of "fair principles" on the charging of interest in the wake of yet another summit between bankers and government officials. The chief concern has been that card companies, in a bid to boost their profit margins, have upped their rates arbitrarily at a time when the Bank of England base rate has been plummeting. Another example of grasping banks, I hear you say, and they do indeed seem bang to rights.

But one point to consider is that banks are braced for a huge round of bad debts and are in effect pricing this into their rates. In fact, there has been little relationship between the base rate and card interest for the past decade or so. It's not like mortgages. The rates that people pay on their plastic depend on a mix of how healthy competition is in the sector and the perceived risk of default.

Everywhere lenders look, they see risk – and the price of risk is higher than ever. That's why the card firms have been raising rates for many of their customers. And on Friday, the accountancy firm PricewaterhouseCoopers predicted the return of the long-forgotten annual card fee as early as next year.

The "fair principles" will lead to customers being given 30 days' notice of rate changes and the option to close their account and repay their outstanding debt at the old rate. This is all welcome, but one crucial omission is a commitment not to impose rate hikes one after the other in quick succession. It's this that often leads to customers being unable to cope.

Turn the screws on PPI

One of the biggest players in the card market, Egg, has been fined £721,000 for mis-selling payment protection insurance (PPI). This underlines how important it is for the Competition Commission to push through its proposal to ban the sale of this dodgy insurance at the same time as a loan or credit card is taken out. The scale of Egg's brazen mis-selling is breathtaking – the regulator found that up to 40 per cent of PPI sales had failings – as is the fact that it went on until December 2007. This was a long, long time after the first big fines for mis-selling had been handed out, and card firms were already on a warning. The radical measures proposed by the commission must be followed through or thousands of other consumers face being ripped off.

Spanish practices

I was in south-west London last week and decided to have a nosey around some estate agents' offices. While looking at one agent's display, a salesman came out on to the street – ostensibly to move a sign – and started to ask me outright what was I looking for, what was I willing to spend etc. It was a little like those bars in Spanish holiday resorts where they have someone outside accosting passers-by and trying to get them to come in and buy drinks.

Estate agents are in absolutely dire straits. If you're a contrarian investor – you believe in buying when everyone is trying to head for the exit – and are secure in your job and have plenty of ready cash, then the second half of 2009 may be the time to buy.