You didn't ask for it, so do you need this credit gift?

A card cheque arrives in the post and Christmas seems like a good time to use it. But it can be costly

A cheque in the post from your credit card lender might look like an early Christmas present, but beware - these gifts are not all they seem.

Often choosing holiday periods when people might be running a little low on cash, banks and card providers send unsolicited credit card cheques to customers accompanied by marketing material encouraging them to spend.

The cheques may seem a useful alternative to plastic - to settle up with a tradesman, say, when you can't use your card - and they also let you pay credit straight into your current account. However, expensive downsides outweigh any value.

The annual percentage rates (APRs) charged are likely to be well above 20 per cent on any purchases, according to research from the financial-comparison service Moneysupermarket.com, and each cheque usually incurs a 2 per cent handling fee.

When you use one, you don't benefit from the usual 56-day interest-free period. Even if you clear the debt early, you'll still pay interest.

And crucially, you don't get the same consumer protection as with a credit card: if the goods or services turn out to be shoddy, you won't have the support of the Consumer Credit Act 1974, which lets you pursue your lender when seeking a refund.

MPs on the Treasury Select Committee are highly critical of the cheques and concerned that they fuel indebtedness. "These cheques can really trip people up as they think they work in the same way [as normal cheques] and won't cost anything," says Susan Kramer, Liberal Democrat member of the committee.

The cheques have now come under fresh government scrutiny. Last month, the Department of Trade and Industry (DTI) launched a consultation on regulating their use and improving consumer awareness of how they differ from credit cards.

Options being considered include printing the APRs and fees clearly on either the cheques, or on attached documents.

This consultation is part of wider-ranging reforms being considered for the UK's consumer credit regime. "It's a step in the right direction," adds Ms Kramer. "I just hope it is going to be well received."

Consumer body Which? has campaigned against the cheques and says the consultation does not go far enough. It is disappointed that the DTI has failed to look at an outright ban.

"The danger is that these cheques - pushed without any clear advice - are usually treated as a cash advance. Therefore, they attract interest from the day they are used," says spokes- woman Emma Bandey.

Which? wants clearer health warnings to be attached to these products. "Consumers should be able to choose to opt in to receive them - and not opt out, as is the current situation," she adds.

As it stands, credit card customers can be sent these cheques without making any direct request for them.

A third of British people with credit cards have at some point received one of these unsolicited cheques, according to new research from insurer More Th>n, and a fifth of the survey sample of 1,010 customers felt they had been encouraged to use them.

Alarmingly, nearly a fifth thought the cheque APR was the same as for regular spending on the credit card itself.

Users of the NatWest Classic card and Royal Bank of Scotland Classic Visa, for example, face an APR of 16.9 on their card; on the cheque, it's 23.01.

Elsewhere, the Halifax's One Visa has a cheque APR of 21.95 (card, 15.9), while Barclaycard Platinum Visa has a cheque APR of 21.9 (card, 17.9).

Peter Tutton from Citizens Advice, the consumer support group, says: "We think the cheques should only be issued to people who have requested them - and only then if people are made aware of how they work and what the risks are."

There's a critical security issue too, he says, when cheques are mailed to people who aren't expecting them: "As the post may be intercepted, the cheques may be used fraudulently."

However, providers defend the cheques as a useful tool for consumer spending. A spokes- woman for Royal Bank of Scotland says they are offered to cardholders as they can be used in places that don't accept plastic. Some 80 per cent of small traders listed in Yellow Pages, the bank reports, fall into this category.

"Cardholders can opt out at any time," she says. "We adhere to guidelines from the Association for Payment Clearing Services and are transparent in providing clear information regarding the APR and fees."

The cheques come with a clear warning that, if they use them, cardholders do not have full protection under the Consumer Credit Act, she adds.

But critics remain to be convinced. "It is easy to see how tempting the cheques can be - especially for those consumers without a lot of spare cash in the run-up to Christmas," says Richard Mason, director of Moneysupermarket.com. "But the perceived convenience is totally outbalanced by the significant costs that can result."

He claims that, in many cases, people are encouraged to use the cheques for everyday spending, or to treat themselves.

"Consumers can get drawn into borrowing money in a very expensive way. If you receive these unsolicited cheques, destroy them immediately."

News
Emma Watson has become the latest target of the 4Chan nude hacking scandal
peopleThreats follows actress' speech on feminism and equality at the UN
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
Life and Style
tech
PROMOTED VIDEO
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Sport
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
Arts and Entertainment
Rita Ora will replace Kylie Minogue as a judge on The Voice 2015
tv
Life and Style
tech
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
life
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Life and Style
life
Arts and Entertainment
Tennis player Andy Murray's mum Judy has been paired with Anton du Beke for Strictly Come Dancing. 'I'm absolutely delighted,' she said.
tvJudy Murray 'struggling' to let Anton Du Beke take control on Strictly
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
Sport
David Moyes and Louis van Gaal
football
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    IT Project manager - Web E-commerce

    £65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Secret politics of the weekly shop

    The politics of the weekly shop

    New app reveals political leanings of food companies
    Beam me up, Scottie!

    Beam me up, Scottie!

    Celebrity Trekkies from Alex Salmond to Barack Obama
    Beware Wet Paint: The ICA's latest ambitious exhibition

    Beware Wet Paint

    The ICA's latest ambitious exhibition
    Pink Floyd have produced some of rock's greatest ever album covers

    Pink Floyd have produced some of rock's greatest ever album covers

    Can 'The Endless River' carry on the tradition?
    Sanctuary for the suicidal

    Sanctuary for the suicidal

    One mother's story of how London charity Maytree helped her son with his depression
    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits