Money: Credit cards that lead you on

Read the small print before you switch companies, warns John Andrew

There is a war going on - the nation's credit card companies are fighting among themselves to gain each other's customers. Cardholders are being bombarded with direct mail, while advertisements leap out from the pages of magazines and papers. To tempt a change of allegiance in the plastic war, there are offers of low interest rates and the promise of saving pounds. It all sounds so tempting.

One of the tactics used to wean us away from our usual cards is low interest rates for an introductory period. The marketing infantry calls these "teasers". The casual reader could be forgiven for thinking this rate applies all the time, but the teasers only apply for a matter of months and sometimes only to balances transferred from rival cards.

Now, there is nothing wrong with introductory offers. Malcolm Coles, senior researcher at consumer magazine Which?, says: "Teaser rates can be a useful way of keeping down the cost of borrowing on your credit card."

However, he warns: "Watch out for inertia. Once the teaser period is up, you'll be switched to the normal rate which can be much higher."

Take the Co-operative Bank'sadvertisement for its Visa card: "UK's lowest balance transfer rate. Transfer your balance for 7.9 per cent APR guaranteed until July '97." The 7.9 per cent is in type one-quarter inch thick and one-and-a-half inches high. The copy states this means you could save up to pounds 150, but in July the rate will increase to 19.5 APR for the remaining balance transferred. Then there is the throwaway line, "The rate for new card purchases is 21.7 per cent APR", which appears in type one-twelfth of an inch high. Whisk out a magnifying glass and you will discover in the small print that the saving is based on transferring pounds 3,000 from a Barclays Visa on the assumption that the balance remains constant.

If the Co-op's offer is not all that it seems, some people who take advantage of a card issued by People's Bank could be in for another shock. Its direct mail describes it as a "no-nonsense card that offers the flexibility and control of other credit cards", but there is no annual fee and the current APR is just 14.4 per cent. This about a third less than other cards. So what's the catch?

The terms and conditions reveal that if the credit limit is exceeded on any statement, there is a pounds 10 charge. If the minimum payment is not received by the due date, there is a pounds 10 charge and if a card is lost or stolen, there is a pounds 10 charge.

Ron Urquhart, managing director of People's Bank in the UK, says: "To maintain our best-value approach we took the decision to impose a charge on those few who don't meet their minimum monthly payments."

Other issuers which penalise cardholders with ancillary charges are MBNA International and NatWest. So, if you occasionally stray over your limit or fail to meet a payment deadline, it is essential to read the small print.

Credit cards were not designed for permanent debt. Perhaps the best move for those with a permanent debt on their credit card is to take out a personal loan over two years, pay off their credit card and then operate their finances on a "no credit' basis. This means paying off their credit card in full each month.

John Andrew is compliance manager at Midland Bank. He writes in a personal capacity. The Independent will investigate Midland's card charges in a separate piece.