Money News: Multi-million earner junked by big banks

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The Independent Online

Royal Bank of Scotland (RBS) and NatWest have scrapped credit card cheques for new and existing customers.

The decision, which took effect on Friday, comes just weeks ahead of the conclusion of an inquiry by the Department of Trade and Industry (DTI), launched last November, into credit card cheques.

The cheques from the two banks - NatWest is owned by RBS - had been "temporarily suspended" at the start of this year "as part of a product review", said a spokeswoman for the group. She added: "[Our] review suggested the majority of customers did not value the service and... [we] withdrew the service permanently."

Banks and card providers send credit card cheques - usually unsolicited - to customers, often accompanied by marketing material that encourages spending.

They may seem a useful alternative to plastic - when paying tradesmen who can't take credit cards, for example - but expensive downsides outweigh any value. Their annual percentage rates (APR) are usually above 20 - much higher than those charged on plastic - and they also incur a handling fee of 2 per cent when used.

Unlike credit cards, which usually give you an interest-free period of up to 56 days from the date of purchase, the cheques rack up interest from the day they're cashed.

And where purchased goods turn out to be faulty or damaged, users don't have the same right to financial redress as in the case of items purchased with a credit card and costing between £100 and £30,000.

All outstanding RBS and NatWest credit card cheques must be paid in to bank accounts by 30 Sep-tember. Cheques will not be honoured after that date.

The move by the group has brought the number of card providers that issue such cheques down from 11 to 10, according to uSwitch.com. The price-comparison service estimates that 144 million cheques have been issued to more than 18 million customers - and that some 98 per cent of these were unsolicited. The website estimates that the cheques earn the banking industry £443m a year.

The DTI is considering several options but has already ruled out a blanket ban on unsolicited credit card cheques.

Insurance: 'Quote me unhappy'

Motorists who insure their car with Norwich Union can expect to pay up to 40 per cent extra for their premiums, it emerged last week.

The insurer has recently launched an advertising campaign using the catchphrase "quote me happy", but is likely to find many customers in a rather different frame of mind after it said prices could no longer be kept at loss-making levels.

Worst hit will be young male drivers, whose premiums will rise by as much as 40 per cent. The average price rise across all customer categories, said Norwich Union, will be 16 per cent. Even low-risk and loyal, longstanding customers will have to fork out an extra 6 per cent.

The company blamed a rise in the cost of claims payouts, coupled with steady or falling car insurance premiums in recent years, for the price increases. These are to be phased in over the next few months.

Many brokers have already warned that insurance prices across the board are cyclical, and due for a rise. A Norwich Union spokesman said it was preparing to lose some of its share of a competitive market, but that it hoped rivals would follow its move.

Others don't agree, however, and argue that the willingness of drivers to shop around for cheap quotes will force some of Norwich Union's competitors to keep premiums low.

Richard Mason of the price-comparison service Moneysupermarket.com described the price hikes as "almost as good as a goodbye letter".

He said: "Norwich Union is increasing prices by 6 per cent for low-risk customers - double the rate of inflation. That is, in effect, a slap in the face for safe drivers, who should see their policy prices go down upon renewal if they haven't claimed."

Travel fraud: Customers left high and dry by Abta

Holidaymakers who have been defrauded by bogus travel agents will no longer be able to get their money back from the Association of British Travel Agents (Abta), the industry body.

Instead, they will have to rely on their credit card provider for a refund. Those travellers whose package holidays are paid for by debit cards, cash or cheques will probably lose their money.

Abta's decision to change its own rules, taken last week, forced it to withdraw from the Office of Fair Trading's Consumer Codes Approval Scheme (CCAS), a consumer-protection plan into which Abta was admitted only last year.

A spokesman said it had made its decision because of the high cost of refunding victims of fraudulent operators, and that it would now be up to the police to investigate such incidents.

The OFT said it was "disappointed" by the association's move.

The new Abta code of conduct for members - to replace its former CCAS status - still offers compensation to holidaymakers whose travel agents go under, said the spokesman.

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