Credit Cards Online Information

Jim Spowart, the ex-chief of Halifax who also helped launch Standard Life Bank and the online mortgage bank Intelligent Finance, has recently announced that credit cards should carry warnings similar to those on cigarette labels to alert shoppers of the potentially high repayment costs. He is even reported as having written to the Chancellor, Gordon Brown, regarding "excessive" charges, and demanding that legislation is put into place. Jim Spowart believes that consumers deserve to receive better protection and that an official body like the Office of Fair Trading should be tasked with looking into the financial practices of the credit card companies.

The fact that many credit card charges are excessive will probably not come as much of a surprise to most credit card owners in the UK; however, with the nation's continually increasing problem of personal debt, there is a mounting need to implement changes that could help to educate and protect UK consumers from getting into further financial trouble.

The most recent reports show that credit card interest rates are now typically around the 16% APR mark, which makes them, on average, over 11% above the current Bank of England base rate of 4.75%. In the letter which he also intends to send to the shadow chancellor, George Osborne Spowart states that the warnings should be explicit in their wording, with statements such as, "This credit card is charging you a rate of interest 200% above the Bank of England base rate."

"[There is] no justification for such rates other than pure banking greed," Spowart told the Scotland on Sunday newspaper. He added, "What we need is legislation in the UK which would insist that lenders highlight the fact that they are charging 200% about the Bank of England's base rate. The cost of these excessive interest rates is certainly contributing to the customers' inability to pay bills."

This situation is especially unfortunate for younger consumers who generally have not had sufficient time to build up a particularly good credit rating, and who are therefore usually offered credit rates towards the upper end of the scale; these younger consumers are also the least informed to make intricate financial decisions. However, these decisions are not easy for older consumers either. Recent changes within the finance industry have made it increasingly difficult for all consumers to compare credit card rates.

Over the past year, the press has been awash with tales of the many different methods by which banks calculate interest rates - which means that some deals may not be as good as they originally seem. The recent legally enforced reduction of late payment charges is likely to lead to an increase of various other fees to compensate for losses from this highly lucrative source. To counteract the additional losses experienced by credit card companies due to people taking up the introductory 0% offers has, over the past 16 month, lead to an implementation of fees for transferring debts from one card to another, as well as a bewildering array of different interest rates assigned for new purchases, currency conversions, credit card cheques, and so on.

The introduction of reduced late fees, personal summary boxes, minimum payment boxes, and improved transparency by part of banks is a big improvement; but as the constant financial reports show, larger financial institutions are liable to claw back any reduction in profits from one area by increasing rates or introducing new fees in other areas - making it is unlikely that any real long term financial benefit will be gained by the average consumer.

# posted by Medical Information : 1:18 AM