Credit card companies are heading for a showdown Gordon Brown!
This is because they have rejected calls to reduce their interest rates (some as high as 69%) after last week’s shock interest rate cut.
In his latest monthly press conference yesterday the Prime Minister called for a ‘new, responsible approach’ to lending.
The average interest charged on nearly 72 million credit cards in circulation in the UK has risen from 16.8% a year ago to 17.6% according to data analysts Defaqto. This has happened despite the Bank’ of England’s base rate almost halving from 5.75% to 3% over the same period.
Gordon Brown said: ‘I think we have got to bring the credit card industry in to talk to them to join with us in establishing clear principles to apply to the costs people face on their existing debts.’
Downing Street said last night credit card companies were behaving ‘irresponsibly‘ and announced that Lord Mandelson, the business secretary, would meet representatives of the industry to discuss their practices and potentially draw up a ‘guide on behaviour‘.
Here are how some credit card rates compare:
6.8% Barclaycard Simplicity Visa
9.9% Co-op Bank Platinum Fixed Rate Visa
15.9% Bank of Scotland Mastercard
15.9% Lloyds Bank Airmiles Duo
16.9% NatWest Classic
31.5% MBNA Travel Amex
34.9% Capital One Classic Visa
39.9% Vanquis Bank
Despite the Government’s warning, PayPal increased the rate on its card from 12.9% to 16.9%, and other leading credit card providers said their rates were likely to remain on hold.
Barclaycard and Nationwide said they would not cut their rates, while Nationwide said:
‘We have no immediate plans to change our credit card rates but our current range remains competitive, with a number of benefits including free foreign usage.
‘We monitor the market to ensure we continue to remain competitive and, as a responsible lender, support any initiative that seeks to improve customer understanding of this market.’
- Homes under threat from missed payments?
And as household bills continue to rise, concern also rises that many of us are losing our homes as credit card firms claw back relatively small sums, often after only just one or two missed payments.
Citizens Advice said 20% of all new debt inquiries in 2007-08 related to credit card, store card and charge card debts saying ‘Bureaux in England and Wales are dealing with nearly 1,400 new credit, store and charge card debts every working day’.
The Consumer Credit Counselling Service said yesterday it had witnessed a surge in ‘charging orders‘ by card firms which may ultimately be used to seize your home.
Apacs, which represents the credit card industry, said the rates charged bore little relation to the Bank of England’s base rate, with spokeswoman Sandra Quinn saying:
“It’s fair to say that credit cards’ interest rates never move up or down as a result of base rate changes. And right now they are not at an historical high in relation to base rates.’
- Regulation to blame?
Defaqto blamed government regulation, like the OFT ‘s 2006 decision to impose a £12 cap on credit card penalty fees, and falling profits on payment protection insurance, for the increasing cost of credit.
But Apacs said that average balances on credit cards had yet to show any increase despite pressure on household budgets. ‘The average balance on a credit card is £1,856, which is lower than it has been for the previous two years,’ it said.
Claim back your credit card fees
The 30.8 million of us who own credit cards have an average of 2.3 cards each, which is down from an average of 2.4 in 2003-04. Apacs say this is due to stricter lending controls, ensuring that those of us with large much debt are not being offered more cards.
The Department for Business, Enterprise and Regulatory Reform said the government would be calling on the credit card industry to bring forward a ‘statement of best practice’ about how providers would apply fair principles to existing debt, continue to make credit available in a responsible manner, and give support to families in difficulty.
So, what do you think the Government do to tackle the credit card lenders?
Let us know your thoughts in the comments below.
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November 13th, 2008 at 8:27 pm
unless there is a real need for a credit card ( some kind of serious crisis that needed immediate action )I would not have one. Call me old fashioned but i would rather work a few extra shifts and buy what ever I need cash. Some of theses companies are theives!
November 17th, 2008 at 9:44 am
Buying goods over £100 on a creditcard makes sense as it offers you protection. Ask the people who lost money over the hamper company crash and the recent tour company. If people exercised proper control over their finances they wouldnt get into debt. I have several credit cards and they all get paid off in full before they attract any interest charges. Save by all means and let the cash earn interest while you spend the card companies money. Then pay them off as soon as the dealine arrives. I owe Sainsburys £2500 which they will get in February as its a 12 month interest free card. In the mean time the money is on deposit earning me interest
November 17th, 2008 at 10:30 am
The government only have themselves to bame for this because it is their responsibility to protect consumers through better regulation:
http://www.starkravingmoderate.com/consumer-credit-21st-century-feudalism/
November 17th, 2008 at 12:47 pm
I have a Vanquis card. I only have this as I got £20 cashback from Quidco for taking it out. The rate I was offered was 59.9%!!! Fortunely, I am some one who won’t be using the card but I feel so sorry for those with no other option!
November 17th, 2008 at 5:17 pm
John. I like your angle on using the credit cards money to make money for you. That makes sense and isnt something I had thought about.
November 18th, 2008 at 10:12 am
I DID NOT ORIGINALLY AGREE WITH CREDIT CARDS, BUT I HAVE SEVERAL WITH DIFFERENT BENEFITS. I HAVE CASHBACK CARDS WHICH PAY ME FOR USING THE CARD WHICH EARNS ME APPROX £100 PER YEAR ON ALL 3. I ALSO TAKE OUT ONES WITH A LONG INTEREST FREE PERIOD FOR MY SMALL BUSINESS AND PAY OFF THE BALANCE WHEN IT IS DUE. SO IF YOU CAN GET SOMETHING FROM THEM USE THEM. I ALSO HAVE FREE TRAVEL INSURANCE IN EUROPE WITH ONE, AND I USE MY NATIONWIDE ONE ABROAD AS THEY DO NOT CHARGE HEFTY FEES LIKE SOME DO.
November 18th, 2008 at 9:30 pm
Credit cards have become a way of life for every one when the inevitable happens. My wife currently has a dispute with barclaycard over a phanotm missed payment and they are treating her like dirt. We have never missed a payment on any card and even though it was there mistake they are now threatening court action. These companys are holding the whole country to ransom.. they are no better than sodding terrorists! you can’t bargain with these people and you will end up losing your home because of a mistake they have made. he government needs to step in a cap the interest rates at a level that people can afford to pay back.
November 20th, 2008 at 9:32 am
My credit card company has just informed me that they have reduced my limit by 75%!! I am in the middle of house renovations,which I intended to pay on my credit card.Thanks Bank of Scotland for devaluing my house,losing my home comforts,and the loss of income from renting 2 rooms!!