Time to think about a change of credit card
Are you still paying sky-high interest rates as well as an annual fee? You probably don't need to.
Saturday 20 April 1996
We simply could not live without them. But the interest rates charged are always arbitrary, and not linked to any objective measure like base rates. Card companies are regularly accused of being quick to put rates up and slow to bring them down.
Credit card companies suffer their fair share of fraud and bad debts. But they charge both the retailers and the card-users for their services and the current rates users pay on standard cards issued by the clearing banks are roughly 1.62 per cent a month on unpaid balances, which compounds up to 22 per cent a year, at a time when inflation is under 3 per cent.
Interest is charged on unpaid balances from the date the transaction was posted until the next account is drawn up, which means accidentally missing a payment date is a very costly exercise indeed, incurring almost two months' interest on some items.
When so many users cottoned on to the extortionate costs of failing to pay bills on time and began doing so, the card companies responded by imposing annual charges to recoup some revenue. Standard charges are now pounds 10-12 a year regardless of how often the card is used or whether the balances incur interest charges or not.
Barclaycard/Visa and Access/Mastercard no longer have a duopoly. Over the years a number of rivals, including Co-operative Bank, Bank of Scotland, Save & Prosper/ Robert Fleming, American Express, Beneficial Bank, and the Halifax , Bradford & Bingley and Newcastle building societies, have entered the market offering lower interest rates on unpaid balances and/or no annual fees. Most of these use the clearing services of Visa and Mastercard, which also guarantees them wide acceptability on a par with the market leaders.
A large number of charities and special interests have also set up affinity cards which offer a full range of card services under the Visa or Mastercard banner and cream off a small proportion of the profits to good causes. Barclaycard hit back with Profile points and Natwest with Airmiles in an attempt to protect their market share and encourage cardholders to concentrate card usage on their established cards.
Most card providers now offer a cheap introductory interest rate on balances transferred from another provider. Last year Co-operative Bank introduced a two-tier structure for its gold cards, offering a choice of a large fee and low interest for persistent borrowers and a no-fee card with higher interest for those who usually pay off in full.
Last month Royal Bank of Scotland teamed up with Advanta, one of the big wheels in credit cards in the US, to launch a card charging interest linked to base rates (and currently 15.6 per cent). A few days ago Petplan, the specialist provider of insurance for pets announced a fee-free card charging a competitive 18.9 per cent on unpaid balances. American Express responded by cutting its standard rate to 16.7 per cent for anyone who spends pounds 1,000 a year and makes at least the minimum payment off their monthly balance. New recruits are offered an even sweeter 13.1 per cent rate until the end of 1996.
Next week People's Bank, another market leader in the US credit card business, is due to launch a new product in the UK and there are no prizes for guessing what it will be, or that it will undercut the market leaders even further.
Simon Read: "Pension freedom is months away but if we don't act soon, the freedom may be to make an expensive mistake with our future"
30 January 2015 11:00 PM
The introduction of the new pension freedoms has been "alarmingly chaotic", reckons Nigel Green, chief executive of the financial consultancy deVere Group, He said this week: "The implementation of changes appears to be being rushed in a cynical attempt to woo older voters ahead of May's election."
30 January 2015 09:24 AM
There has been continued criticism of banks' delaying tactics and failure to find those affected by by the UK’s biggest-ever financial mis-selling scandal
26 January 2015 03:29 PM
Companies will be required to ask about health and lifestyle choices or marital status, to protect consumers who do not take up the government’s offer of the Pension Wise guidance guarantee service
23 January 2015 08:00 PM
I had dinner with the pensions minister Steve Webb this week. There was a wide-ranging discussion about the new pensions freedoms starting in April, and changes to the state pension. Crucially, I also got to ask Mr Webb whether he had any plans to have another look at the injustice that is frozen pensions.
23 January 2015 08:00 PM
23 January 2015 08:00 PM
While the health of the economy is not insignificant, Mark Dampier finds it incredibly unpredictable in terms of its impact on the stock market
21 January 2015 12:32 PM
A new free app is aimed at the three-fifths of Brits who have never switched supplier
20 January 2015 09:34 AM
Regulator’s investigation into the market found that around £160bn was held in easy access savings accounts that pay interest lower or equal to BoE base rate
17 January 2015 12:00 AM
Simon Read: Information is power. And it's in the wrong hands when people are cold-called by companies that know they're in debt
17 January 2015 12:00 AM
In debt? You're likely to be targeted by unscrupulous companies that hope to profit from your misfortune. They may try to pretend to be your friend by offering what they call "help" – but almost certainly that help will come with a cost and leave you worse off than you were before they got in touch.
17 January 2015 12:00 AM
In less than three months' time radical changes to pensions will take effect, providing investors with more freedom. Yet for those who prefer to make their own investment decisions, the choice of funds available is overwhelming. And an income drawdown account is also not particularly easy to manage.
15 January 2015 12:23 PM
The minimum amount for which you can be forced into bankruptcy is being raised from £750 to £5,000
Mark Dampier: How to get an income now that savings are past the 'use by' date
Thousands of UK investors could lose out following collapse of Secured Energy Bonds
Bargain Hunter: Fly off for a winter break in France or Portugal for well under £100
Millions in line for compensation after being sold unnecessary credit card cover
Weekly Money: Round-up of the personal finance stories you may have missed 26-30 January
- 1 Three-year-old boy shoots pregnant mother and father in New Mexico
- 2 Stephen Fry explains what he would say if he was 'confronted by God'
- 3 Jewish community urged to boycott Cornwall village after residents vote for 'Hitlers Walk' sign to be reinstated
- 4 Benedict Cumberbatch's Alan Turing gay-rights campaign snubbed by Prince William and Kate Middleton
- 5 Kim Sears responds to swearing controversy with 'parental advisory' T-shirt at Andy Murray's Australian Open final
Stephen Fry explains what he would say if he was 'confronted by God'
The open loathing between Barack Obama and Benjamin Netanyahu just got worse
9 reasons Greece's experiment with the radical left is doomed to failure
President Putin is a dangerous psychopath - reason is not going to work with him
Have we reached 'peak food'? Shortages loom as global production rates slow
Britain's widening poverty gap should be causing outrage at the start of the election campaign
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