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Credit card companies reduce default charges

Date of Publication: Sunday, 27 April 2008 11:21

The amount that credit card and store card customers are charged when they default on a payment is to be reduced as a result of action taken by the Office of Fair Trading.

 

The amount that credit card and store card customers are charged when they default on a payment is to be reduced as a result of action taken by the Office of Fair Trading.

The OFT approached Clydesdale Financial Services Limited – which is owned by Barclays – and asked them to ease the penalty on customers for failing to meet a repayment on their credit and store cards, and it has now brought the charge down by almost half from £22.50 to £12.

Prompted into action by consumer complaints, the OFT said that the charges have previously been set at a level which was much higher "than was considered fair". This is one of various actions taken by the OFT on unfair credit card charges and many people have been successful in reclaiming credit card charges from their provider.

Mike Haley, head of consumer protection at the OFT, called the decision "a great result for consumers", and said that the OFT is "very pleased that Clydesdale Financial Services has decided to reduce its charges."

The OFT asked credit card and store card providers to cap the excessively high rates at £12 in April 2006, having declared that they were disproportionately high, but in order to recoup the lost revenue from the default charges, providers have been hiking rates and charges elsewhere, says Moneyfacts.co.uk, calling into question the effectiveness of a cut in default charges.

Michelle Slade, analyst at Moneyfacts.co.uk, comments: "In April 2006 the average purchase rate on a credit card was 14.9 per cent; today this has jumped to 16.4 per cent. Previously whereas only a select number of customers were being penalised, now all borrowers are paying the price.

"For any customer who are paying their bill in full each month, the rate increase will have no impact, but with many households struggling with increasing financial pressures, those who only repay the minimum will be hardest hit. Anyone with a balance of £5,000 repaying just 2.5 per cent per month will end up paying an additional £755 in interest from the 1.5 per cent increase in purchase rates."

She added that while rates and charges on credit cards have increased, "there are still good deals to be found for those with a good credit history.

"Shop around and find a card that best suits your needs, whether it's a balance transfer deal if you have an existing debt on a card, or a card with an incentive such as cashback if you pay your balance off in full."

Sunday, 27 April 2008 11:21
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Top 5 Credit Cards

Card
Balance Transfers
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Typical APR (variable)
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12 mths
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26 mths
18.9%
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12 mths
0%
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18.9%
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Introductory Offer
Balance Transfer Rate: 0% for 12 mths
Balance Transfer Fee: 3% (min £3)
Purchase Rate: 0% for 26 mths
Representative APR
Purchases: 18.9% p.a. (variable)
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Balance Transfers: 11.9% p.a. (variable)
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Purchases: 11.1% p.a. (variable)
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Cash Advance: 24.9% p.a. (variable)
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Cash Advance: 12.9% p.a. (variable)
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Advice

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Representative APR
Purchases: 18.9% p.a. (variable)
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Balance Transfers: 18.9% p.a. (variable)
Balance Transfer Fee: 3%
Cash Advance: 18.95% p.a. (variable)
Standard Features
Credit Limit: Subject to Status
Interest Free Days: Up to 56 days
On-Line Banking: Yes
Approval Criteria
  • You earn at least £20,000 per year
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  • You DO NOT any CCJs or have been made Bankrupt
  • You have NOT missed payments on your current store cards, credit cards, loans or mortgages
  • You ARE in employment (receiving an annual salary)
  • You can provide a telephone number that you can be contacted on

Advice

A fee of 3.0% will be applied, then reduced to 1% by a refund.

Introductory Offer
Balance Transfer Rate: 0% for 28 mths
Balance Transfer Fee: 1% fee
Purchase Rate: 0% for 12 mths
Representative APR
Purchases: 18.9% p.a. (variable)
Representative Example: If you spend £1,200 at a purchase interest rate of 18.95% (variable) your Representative APR will be 18.9% (variable).
Annual Rates
Balance Transfers: 18.9% p.a. (variable)
Balance Transfer Fee: 3%
Cash Advance: 18.95% p.a. (variable)
Annual Fee: N/A
Standard Features
Credit Limit: Subject to Status
Interest Free Days: Up to 56 days
On-Line Banking: Yes
Approval Criteria
  • You earn at least £20,000 per year
  • You are at least 18 Years of Age
  • You are a permanent resident/citizen of the UK
  • You have NOT been declined for a Halifax or Bank of Scotland Credit Card in the last 6 months
  • You DO NOT any CCJs or have been made Bankrupt
  • You have NOT missed payments on your current store cards, credit cards, loans or mortgages
  • You ARE in employment (receiving an annual salary)
  • You can provide a telephone number that you can be contacted on

Advice

Bank of Scotland will refund 50% of your balance transfer fee bringing the fee down to only £100.

Introductory Offer
Balance Transfer Rate: 0% for 28 mths
Balance Transfer Fee: 2.50% fee
Purchase Rate: 0% for 12 mths
Representative APR
Purchases: 18.9% p.a. (variable)
Representative Example: If you spend £1,200 at a purchase interest rate of 18.95% (variable) your Representative APR will be 18.9% (variable).
Annual Rates
Balance Transfers: 18.9% p.a. (variable)
Balance Transfer Fee: 3%
Cash Advance: 27.9% p.a. (variable)
Annual Fee: N/A
Standard Features
Credit Limit: Subject to Status
Interest Free Days: Up to 56 days
On-Line Banking: Yes
Approval Criteria
  • You are at least 18 Years of Age
  • You are a permanent resident/citizen of the UK
  • You have NOT been declined for a Halifax or Bank of Scotland Credit Card in the last 6 months
  • You DO NOT any CCJs or have been made Bankrupt
  • You have NOT missed payments on your current store cards, credit cards, loans or mortgages
  • You ARE in employment (receiving an annual salary)
  • You can provide a telephone number that you can be contacted on

Advice

3% will be charged as a balance transfer fee, minimum transfer amount is £100.

Introductory Offer
Balance Transfer Rate: 0% for 28 mths
Balance Transfer Fee: 3% fee
Purchase Rate: 0% for 3 mths
Representative APR
Purchases: 18.9% p.a. (variable)
Representative Example: If you spend £1,200 at a purchase interest rate of 18.9% p.a (variable) your representative rate will be 18.9% APR (variable)
Annual Rates
Balance Transfers: 18.9% p.a. (variable)
Balance Transfer Fee: 3%
Cash Advance: 18.95% p.a. (variable)
Annual Fee: N/A
Standard Features
Credit Limit: Subject to Status
Interest Free Days: Up to 56 days
On-Line Banking: Yes
Approval Criteria
  • You are at least 18 Years of Age
  • You have a Good Credit History
  • You are a permanent resident/citizen of the UK
  • You have a bank or building society account