Credit card companies defended by industry body

Posted in 'Personal Finance' by Richard Catlin

01 May 2009

APACS, the UK’s payments association, has leapt to the defence of credit card issuers, following a damning report by the consumer watchdog Which?

In a recent feature titled ‘Credit card tricks are no joke’, Which? claims that credit card companies are “out of touch with reality”, and that the majority have increased interest rates and charges in the last 12 months at a time when consumers need more help with managing debt.

Which? reports that 28 major card issuers have either increased their APR or charges, or made amendments to their terms and conditions - such as the number of interest-free days that customers get after making a purchase. It also highlights a drop in the number of cards offering cashback as well as the declining competitiveness of balance transfer offers.

We’ve highlighted a few of the more significant changes ourselves in recent months. Egg seem to have been involved in a good proportion of these, with their personal lowlights including upping their cash withdrawal fee to a massive £5, increasing the APR for existing card holders by up to 7%, and stopping paying interest on ‘in credit’ balances.

In addition to a number of other card issuers simply upping interest rates, additional changes that may have slipped beneath the radar include Nationwide starting to charge for overseas transactions and some card companies reducing their interest free period on purchases.

APACS, which seeks to provide a non-competitive platform for credit card companies to come together and resolve issues, has responded by defending the industry. It claims that UK consumers still have an excellent choice of deals to choose from, and that the basis of the Which? report is misplaced.

APACS’ main argument here centres on the use by Which? of the Bank of England’s base rate in relation to the calculation of credit card APR’s. APACS points out that typical APR’s have actually fallen since 1995, when the average rate was 22.9%, compared to 16.1% in 2008.

Whilst both parties make valid observations, it’s clear that there are big differences between the best and the rest when it comes to choosing which credit card to use. Our 2009 Banking and Credit Card Survey has revealed that for the first time in 5 years, customer service levels have dropped, but cashback deals such as the American Express Platinum cashback card, and Virgin’s market leading 16 month balance transfer offer highlight that there are still great deals to be had.

However, with banks and credit card issuers still showing caution in their lending criteria, applying for a card based on your credit rating – one that is much more likely to say yes – is vital. Our own research has found that switching to a cheaper credit card based on your credit rating could save you in the region of £400 a year.

You can find lenders matched to your credit score for free on checkmyfile, or for an even more accurate picture, by checking your credit report online – where you will be able to make sure that all the information held about you is correct at the same time.