Credit card tricks are no joke, says Which? Money

Credit card companies are out of touch with reality, says Which? Money, after its latest research1 found that most major credit card providers have put up interest rates and charges in the last twelve months or used tricks to squeeze extra cash out of customers.

[ClickPress, Wed Apr 22 2009] The consumer watchdog found that 28 providers of widely-held credit cards²(http://www.which.co.uk/creditcards ) had either increased interest rates or other charges, reduced the number of days to pay or reduced the number of interest-free days over the last year.

> Credit card (http://www.which.co.uk/creditcards ) rates have gone up by an average of 0.5 per cent but Mint, NatWest and Royal Bank of Scotland have all made significant rate hikes of 4 per cent³, and Abbey and the Post Office forced up rates by 3 per cent4.

> Both MBNA and Alliance & Leicester have reduced the number of interest-free days and days to pay on cards5.

> Only eight companies still offer cashback cards – less than half of those available two years ago. Some have also cut the amount of cashback available.

> Many providers have put up balance transfer fees over the year. Ulster Bank increased its introductory balance transfer rate from 0 per cent to 4.95 per cent and also introduced a transfer fee of 2.9 per cent to its introductory offer on two credit cards.

> Cash withdrawal fees have been creeping up too - Debenhams Mastercard minimum cash withdrawal fees and credit card cash withdrawal charges have both doubled in the last year6.

> Other companies, such as Egg7, have left their headline APR alone to entice new customers but put rates up for many existing customers.

Martyn Hocking, editor, Which? Money, says:

“At a time when we’re all feeling the pinch, it’s hugely disappointing that credit card companies are choosing to put the squeeze on borrowers more than ever. With interest rates so low, it is time for credit card providers to enter the real world. They need to make credit cheaper and their charges more transparent and fair, rather than making it harder than ever for people to make ends meet and pay back their debts.”

Which? Money offers people with credit cards the following advice (http://www.which.co.uk/reviews-ns/credit-cards/credit-card-faqs ):

> Keep an eye on your card’s interest rate and charges to make sure they’re not creeping up.
> If your provider puts your rate up, don’t take it lying down – switch to a Which? Money Best Buy.
> If your bank has increased your credit card interest rate, then complain - particularly if it hasn’t followed the industry’s ‘fair principles’8.
> If you tend to use your card to borrow, Which? Money Best Buys take into account how providers calculate interest to find the cheapest card.
> If you usually pay your bill off in full the APR is not important, so look for a credit card which offers cashback.

- Ends -

Notes to editors

Which? is the leading independent consumer champion in the UK, providing impartial, expert information on thousands of products and services to help make individuals as powerful as the organisations they have to deal with in their daily lives. To find out more go to www.which.co.uk.

The full article ‘Credit cards on trial’ appears in the May 2009 issue of Which? Money magazine. For further information, the full article, a copy of the magazine or an interview, please contact Helen Lacey.

For more information visit www.which.co.uk/money

Research notes

1 Which? Money looked at the period from February 2008 to February 2009.
2 The 28 credit card providers are: Barclaycard, Tesco, Natwest, M&S, Nationwide, Lloyds, Amex, HSBC, Co-op, MBNA, Egg, Halifax, Alliance and Leicester, Royal Bank of Scotland, Sainsburys, First Direct, Bank of Scotland, Smile, Abbey, Asda, Bank of Ireland, Citi, John Lewis, Mint, Northern Bank, Post Office, Ulster Bank, Virgin Money.
3 From 12.9 per cent in 2008 to 16.9 per cent in 2009.
4 Abbey’s rate increased from 15.9 per cent to 18.9 per cent, and the Post Office’s rate increased from 16.9 per cent to 19.9 per cent.
5 This means that people have less time when they are not charged interest on their balance and fewer days in which to clear their balance and therefore avoid paying any interest.
6 Debenhams MasterCard put its minimum cash withdrawal fee up from £1.50 to £3, and it will now charge 3% if to use the credit card to withdraw cash, where last year it would only have charged 1.5%.
7 Egg recently put its rates up for half a million of its customers, by up to 7%.
8 At the end of 2008, banks agreed a set of ‘fair principles’ with the government, designed to put an end to last minute hikes in interest rates. If credit card companies put people’s interest rates up, it should now do the following things:
> Offer the opportunity to close the account and pay the balance off at the old rate.
> Provide at least 30 days’ notice of a rate increase, and restrict how often they will increase it.
> Not increase the interest rate if the card holder is struggling to repay their credit card debts.
> Give people breathing space of 60 days if they are struggling to repay their debt. They should not chase the debt if the card holder is trying to sort it out and agree a repayment plan.