US bank steps up lending war

The credit card war in the UK escalated yesterday as People's Bank, based in Connecticut in the US, launched a new card offering a 14.4 annual percentage rate.

The People's Bank card, which undercuts traditional high-street issuers by about 7 percentage points, has no annual fee and a 56-day interest- free period.

People's Bank said yesterday that a typical Barclaycard shopper, paying 22.3 per cent APR on a average balance of pounds 1,500 would save about pounds 100 a year by switching cards. Access users, now paying 23.4 per cent APR, would save at least pounds 15 more.

Ronald T Urquhart, the UK managing director of People's Bank, said: "For too long now, credit card issuers in the UK have been managing credit to their own advantage, to the extent that some are still charging APRs almost four times higher than the bank base rate.

"The average credit card APR rate is 21.2 per cent, which means British shoppers are paying pounds 657m too much interest each year. [Our] card cuts through this complacency."

People's Bank aims to undercut traditional issuers by offering a no- frills service from its UK headquarters in Northampton. The bank, founded in 1842, is among the top 30 credit-card issuers in the US.

In the past few months, aggressive newcomers have grabbed a share of the market by offering slightly more competitive rates.

Royal Bank of Scotland has launched the Advanta card, offering 15.6 per cent APR, linked to base rates. The RBS MasterCard charges 14.5 per cent APR.

Robert Fleming, which has long offered two of the most competitive cards, charges 14 per cent and 11.5 per cent APR respectively, the latter being linked to bank base rates. Despite its rate, the Robert Fleming card only has 200,000 users compared to 9 million Barclaycard customers.

Mark Warde-Norbury, banking services manager at Robert Fleming, said: "There is an enormous amount of inertia in the market. There also appears to be a cartel, with the high street banks operating on very large margins and making substantial profits. Until one of the major issuers cracks and cuts its rates, the war will only be at the margins."

A Barclaycard spokeswoman said the popularity of its card lay in the added benefits, such as loyalty bonuses ranging from cheap holidays to toasters.

"We are successful because we were first in the market .... Our customers stay with us because they want more from us than a cheap headline rate, which then goes up through a range of hidden charges, including shorter credit times or additional bills when people don't pay them off on time.

"In many cases, people find that with other users who come from outside the UK and have less experience of this market, the credit limits they receive are lower."

She added that 50 per cent of Barclaycard users paid off their entire debts each month.

The rate card

Company APR %

Robert Fleming/S&P 11.50*

Robert Fleming/S&P 14.00

People's Bank 14.40

Royal Bank of Scotland 14.50*

Hamilton Direct 14.50*

UNICEF 14.90

RBS Advanta 15.60

Frizzell Bank 16.10

Barclaycard 22.30

NatWest Access 22.90

* No interest-free period even if account is cleared in full each month

Source: Moneyfacts

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence