Yet again, MPs have rebuked credit-card firms for their unjust charges and practices. Here are several of their crafty card tricks.
An influential Parliamentary committee has hauled credit-card companies over the coals once again.
The Treasury Select Committee warned that lenders penalise cardholders too heavily and too often hide behind their small print. The committee has been investigating the credit-card market for nearly two years, and called for the following changes to industry practices:
- Cardholders should be given clearer warnings about the penalties levied for late payments and credit-limit breaches, which are ridiculously high.
- Interest-rate calculations should be simplified, ideally by the introduction of a single approved calculation method for the Annual Percentage Rate, or APR.
- Card firms should stop sending unsolicited credit-card cheques to cardholders, which MPs regard as wholly irresponsible lending.
- Rip-off payment protection insurance (life, accident, sickness and unemployment cover) should be investigated by the Financial Services Authority, the financial watchdog.
- Lenders should share data more freely, in order to prevent customers borrowing too much across several different cards.
- There should be less small print on credit agreements, which customers find too complex to understand.
Despite the introduction of summary boxes almost a year ago, it's almost impossible for non-experts to compare card deals. That's because lenders continue to rely on what I call "confusion marketing" using financial mumbo-jumbo and an array of different deals to baffle us!
Obviously, these firms have a right to charge penalties to cardholders who bounce payments or breach their credit limit. However, they make excess profits from these charges, which are typically around £25 a time. A charge of £5 would be much more fair and reasonable, perhaps with it being waived for first-time offenders.
Unsolicited credit-card cheques were the bane of my life until I threatened to close my accounts unless I was placed on a "do not mail any dross to this stroppy customer" list. I steer clear of using these cheques, because they usually incur transaction fees, typically £35, plus they normally attract the same interest rate as cash withdrawals, which could be 20% a year or more.
Finally, credit card repayment protection (CCRP) is, quite simply, a colossal con. This article proves that credit-card companies are blatantly over-charging for this protection. I calculate that card issuers and their insurers are pocketing a billion pounds a year from the sale of CCRP. Hence, I'm delighted that the FSA may be poised to investigate the card issuers and insurers who are involved in this anti-competitive market.
These are only a few of the tricks that cunning card companies play. You can learn more in Ten Crafty Card Tricks and Be A Winner In The 0% Game!
More: We have an excellent selection of leading cards in our Credit Card centre.
