'New 0% deals from HSBC deemed 'unfair''
May 31, 2007 at 9:57 am
HSBC, one of the UK’s leading high-street banks, issued two new 0% credit card offers this month, however the cards have received some criticism from analysts who claim they are “unfair” because the deal that customers qualify for depends on the method by which they apply.
The first offer is available in HSBC branches and over the phone. It features 0% interest on purchases for 12 months as well as 4.9% interest on balance transfers made within the first thirty days, until January 31st 2012. There is a 2.5% balance transfer fee, and the typical standard APR (annual percentage rate) is 15.9%.
The second card available to customers applying online offers 0% interest on balance transfers made within the first thirty days for 12 months (with a 2.5% balance transfer fee), and 0% on purchases for the first three months. It shares the typical 15.9% standard APR.
Spencer May, head of consumer cards at HSBC, commented: “Our research shows that our customers’ behaviour varies according to how they apply for a card. We have seen a clear difference between the needs of our branch and online customers, particularly in relation to introductory offers. With this knowledge we have tailored our two new offers to meet their differing needs.”
Industry reaction
Reaction to the simultaneous credit card launch has been decidedly mixed.
Michelle Slade, personal finance analyst at money search engine MoneyFacts.co.uk commented: “New cards from HSBC combine market leading 0% purchase or balance transfer deals, with either a lifetime balance transfer deal or a limited 3-month 0% purchase deal.
“Offering 12 months 0% on purchases for phone and branch applications leads the market, followed closely by 10-month deals from Sky and Sainsbury’s Bank. While the online card offering 12 months 0% on balance transfers enters at number three in the MoneyFacts.co.uk best buy charts.”
She explained that the best buy charts were dominated by 0% balance transfer deals of 12 months or longer, but that new levels of competition were not being reflected by introductory rate purchase deals. Although the purchase deals market is less buoyant than that for balance transfers, she noted that HSBCS’s 12 month offer was one of a few “great deals” currently available.
Commenting on the new cards, Rob Kenly, head of credit cards at MoneySupermarket.com agreed that the launch of a 0% offer on purchases for 12 months had “raised the stakes” and propelled HSBC to the top of best buy tables for introductory deals on purchases.
However, he expressed disappointment that the deal was restricted to branch and phone customers, and not available to those wishing to take up the offer online.
“My disappointment is compounded by the fact the second card launch is an online offer and nothing to write home about. It is offering 0% on balance transfers for 12 months – but Barclaycard, Virgin Money and Capital One all offer longer balance transfer periods than this,” he continued.
“Additionally, people must ensure they transfer the balance within 30 days of taking out the deal or they will not benefit from the 0% introductory offer.”
'Halifax re-launches One Card'
May 30, 2007 at 12:55 pm
Halifax has re-launched its popular One Card this month, and is providing it with some innovative new features, such as a 0% APR anniversary offer – a first for high-street banking.
Much like its predecessor, the new-look card features the same introductory offer of 0% APR (annual percentage rate) for nine months on both balance transfers and purchases.
Many card providers take an ‘either/or’ approach to 0% deals, and Halifax estimates that the offer of 0% APR on both balance transfers and purchases could save a typical card user more than £58. However, it should be noted that the standard 3% balance transfer fee is one of the highest on the market.
The new card differs to the original by including a further 0% APR for six months on new balance transfers made from the start of the calendar month immediately following the first anniversary of the card. Halifax believes that this new feature will provide a unique way to reward customers for their continued loyalty.
This incarnation of the Halifax One Card features a standard APR of 13.9% once the 0% periods have expired. It also provides customers with cover against online fraud for purchases made on the internet, free card replacement and the ability to manage the card online.
“Customers have told us they want to be rewarded for their loyalty and we have responded to this,” claimed Ken Stannard, head of Halifax Credit Cards. “The new-look One Card means not only do you get a great up-front deal but you can also get rewarded a year on.
“It is a best buy product which combines a low typical APR with both an introductory and anniversary 0 per cent offer. This is yet another high street banking first from the Halifax,” he continued.
Criticisms
However, Michelle Slade, a personal finance analyst at online finance search engine Moneyfacts.co.uk, explained: “The new terms of this card place the Halifax deal in a competitive position, but it is by no way a market leader. Moneyfacts.co.uk best buy charts are nominated with 0 per cent deals of 12 months or longer. The balance transfer fee of three per cent is the highest on the market and standard rates lower than ten per cent can still be found.”
She explained that the new feature on the card, which allows customers to transfer a further balance on the anniversary of the card at 0 per cent for six months with a fee of three per cent, promoted “a spending pattern which should not be encouraged”.
“While paying off your existing balance transfer deal, you should not create another debt on a second card, which can then be ‘bailed’ out by a second balance transfer deal a year later,” she explained.
“Credit cards should be used as a short term borrowing option, ideally to manage any cash flow mismatches, not as a longer term, hard core borrowing choice.”
The new Halifax One Card is now available from all Halifax branches, over the phone and via the web.
'Barclaycard's low-use customers to face fee'
May 29, 2007 at 2:07 pm
Low-use customers of Barclaycard are facing the possibility of having to pay for the privilege of not using their card enough. Barclaycard has 9.8 million customers and around one million of these simply never use their credit cards. People get new cards and do not bother to close their old accounts, leaving regular users to subsidise the costs to the company of maintaining the inactive accounts.
The fee which could be introduced from September is expected to be between £10 and £20 per year and certainly no more than £2 per month. This would raise up to £20 million pounds per year which would go part way to recouping money lost after changes were made last year under new Office of Fair Trading rules.
Barclaycard has said that they will write to customers likely to be affected by the new charges to warn them. It will then be up to the customer whether to start using their card close the account or pay the fee. Although other credit card companies such as Lloyds TSB have already introduced a charge for inactive accounts, Barclaycard, which has 15% of the market, is the biggest company to consider doing so.
'Consumers confident on credit despite record debts'
May 21, 2007 at 9:15 am
Adult consumers in the UK possess an average unsecured debt of £8,800 and have collectively run up a credit card debt of almost £5.5 billion, according to new figures from financial charity CreditAction.
The charity, which aims to educate consumers on the dangers of credit, reports that three quarters of all credit cardholders regularly fail to clear their account and subsequently face interest rates of as much as 20 per cent.
The immense level of debt is caused in large part by the many different providers that offer customers the choice of hundreds of different credit card deals, but consumers are also responsible for spending beyond their immediate means.
British consumers have the largest personal debt of any country in Europe, collectively owing an immense £1.3 trillion. Official data suggests that over 30,000 individuals claimed insolvency in the first quarter of 2007 and it is expected by some market analysts that as many as 130,000 individuals will be forced to do the same by the year’s end.
Consumers remain confident
Despite the record levels of debt, Julia Dallimore, marketing director at loan provider Picture Financial, believes that most consumers are happy with their credit and borrowing situation.
Commenting during Credit Awareness Week (May 14th-20th), which aimed to promote greater understanding of credit issues among the general public, Ms Dallimore said: “Contrary to many of the reports out there the vast majority of us are comfortable with our levels of credit and borrowing and use it as an acceptable means to maintain our standard of living”.
She also asserted that the key to avoiding financial hardship is to understand the terms of any financial agreements, but warned that it was becoming “increasingly apparent” that people are having difficulties with this.
“To ensure people are better informed about their finances, it is vital that consumers are completely clear about what they are trying to achieve when taking on extra borrowing, whether it is to pay off their existing credit in a shorter timeframe or reducing their monthly repayments for greater financial freedom.”
A recent survey conducted by CreditExpert.co.uk, the online credit monitoring service from Experian and sponsor of Credit Awareness Week, found that six million British consumers would only be concerned by their debts if they exceeded £15,000.
Remarkably, 1.4 million people, five per cent of the adult population, claimed that they would not worry about debts until they passed £50,000.
The report also found that consumer confidence reached an annual high during April. In fact, 41 per cent of people with credit or loans claimed they were “very comfortable” with their current financial situation.
Jim Hodgkins, managing director of CreditExpert.co.uk, noted: “The fact that so many Brits are happy with unsecured borrowing of at least £15,000 may seem shocking on first sight, but the ‘credit comfy’ generation seems to have become anaesthetized to the real implications of mounting debt.
“With the current rise in interest rates, many will find that debt they blithely ignored is in danger of spiralling out of control,” he warned consumers.
'Fee-free cards coming under threat'
May 15, 2007 at 10:36 am
The fate of fee-free credit cards looks increasingly grim, as Morgan Stanley becomes the latest in a growing line of card providers to introduce annual fees for its customers.
The firm announced last week that it would be implementing a new £20 annual fee for a “selection” of its Black card customers from June 1st. A spokeswoman said: “We have reviewed the spending patterns and repayment history of customers and as a result we have imposed the fee for a number of customers.”
With the Office of Fair Trading’s (OFT) crack down on penalty fees hitting their revenues hard, card providers are turning to monthly and annual fees in order to generate revenue from customers who maintain a positive credit balance avoiding interest on their repayments, and those who use their credit card very rarely.
The move by Morgan Stanley follows that of Co-operative Platinum Visa and Northern Rock Base Rate Visa, both of which implemented a £2 monthly charge (£24 a year) earlier in the year. Similarly, Lloyds TSB recently introduced a one-off annual fee of £35 for customers that do not use their credit card regularly. According to independent price comparison service uSwitch.com, the company generated an income of £1.79 million from these charges in one month alone.
Mike Naylor, a personal finance expert at uSwitch.com, said: “We are seeing an increasing number of leading credit card providers bringing in monthly or annual fees, which is of little surprise given that many are trying to find new ways to recover the £300 million of profits lost as a result of the OFT’s clampdown on default charges just over a year ago.
“We would not be surprised to see more credit card providers move to introduce fees, in particular monthly or annual fees, before the end of this year,” he continued.
“As such, consumers should continue to keep a close eye on the small print and the correspondence they receive from their provider, and seriously think about switching away from those that do introduce fees for no added benefit.”
Currently, the card on the market with the highest annual fee is the American Express (Amex) Centurion card, or Black card as it is commonly known. Customers in the UK that own an Amex Centurion pay an annual fee of £650. In the US, the annual charge is $2,500 (£1,260), while in France, Italy and Spain, it is as much as €2,000 (£1,365) a year for the exclusive card.
The Amex Centurion card is available by invitation only to those who spend a minimum of $250,000 (£126,110) in 12 months on another Amex card, and maintain an excellent credit history.
Unlike the American Express Centurion card and other “black” cards which offer the most exclusive of privileges and services, the Morgan Stanley Black card is a regular credit card. It is typically offered to customers who have been rejected for the Morgan Stanley Platinum card. While both offer similar interest rates and facilities, the Black card has a significantly lower credit limit.
'New 'wave and pay' cards for small purchases'
May 14, 2007 at 12:09 pm
A new contactless credit and debit card technology was unveiled by the banking industry this week which will allow consumers to pay for transactions of £10 or less with no more than a wave of their card.
The new system requires that card holders hold their card up to an appropriate card reading terminal so it can scan the card and process the payment. There is no need for the customer to type in a PIN or sign a cheque.
As a security precaution, the card’s chip will keep a record of all such transactions and will, from time to time, prompt the user to enter a PIN.
Contactless cards are supported by both Visa and MasterCard and will enter circulation from September 2007 in London, then in early 2008 around the rest of the UK, according to payment group Apacs.
More than 20 billion payments of £10 or less are made every single year in the UK, and backers of the new card are hoping that customers will see it as a convenient alternative to carrying around petty cash.
Apacs predicts that there will be over five million active ‘wave and pay’ credit and debit cards by the end of next year as well as over 100,000 participating retailers.
The following organisations are planning to take part in the initial roll-out of the new cards:
- Bank of Scotland
- Barclaycard
- Citi
- Euroconex Technologies
- Halifax
- HSBC
- Lloyds TSB
- The Royal Bank of Scotland Group
Jose San Juan, Visa UK managing director, said: “I am pleased that the industry has united on standards for cards and terminals that will provide a highly convenient and quick way to pay for low value items.”
“By the autumn the first UK cardholders will be buying a coffee or a sandwich in a split second, and retailers will enjoy quicker transactions, the security of the payment guarantee and an end to the high costs associated with handling cash.”
John Bushby, UK general manager for MasterCard Europe, was in agreement. He explained that trials had shown that “consumers love the convenience, simplicity and security of being able to ‘tap and go’ when paying for every day things such as newspapers, sandwiches and drinks.”
“We are confident that consumers in the United Kingdom will be quick to adopt contactless payments as they are faster and more convenient than cash.”
However, fears have been raised over the security of the new cards, and some critics believe that the new system will lead to a fresh rise in card fraud.
David Kuo, head of personal finance for Fool.co.uk, has also warned that the use ‘wave and pay’ technology is likely to result in customers spending more than they do with cash.
“The rollout of contactless credit cards will give consumers a completely new way to pay for low-value items with the wave of a hand. However, just because something is of low-value is not the same as being of no value,” he explained.
“Contactless payment may be billed as being more convenient than cash. But it is also likely to lead to consumers buying things that they don’t need with money that they cannot afford.”
'Chip and PIN forces credit card fraud abroad'
May 9, 2007 at 12:28 pm
Physical credit card fraud has fallen by nearly 70 per cent since the chip and PIN standard was introduced in the UK 24 months ago, but fraudsters continue to find new ways to steal money.
Payment industry specialists Apacs reported at the 2007 Retail Fraud conference in London that chip and PIN had helped reduce face-to-face fraud from £220 million to £70 million.
The 133 million chip and Pin cards currently in circulation are supported by 900,000 sales points and over 61,000 ATMs. Over 94 per cent of physical card payments are now verified by PIN, Apacs told the conference.
Yet despite these impressive statistics, the overall level of card fraud has only dropped by a tiny amount, with many fraudsters quick to switch to card-not-present (CNP) and overseas scams. Apacs admitted that CNP fraud had risen by 41 per cent and that much of the card fraud had moved to countries that do not use chip and PIN as standard.
“Fraud is tougher to undertake in chip and PIN countries such as France, Belgium, Austria and Ireland. Most of Europe is working towards chip and PIN. The United States is not,” a spokesperson for the firm commented.
Many banks are implementing intelligence systems that detect unusual overseas card use but they are just as likely to target legitimate holiday makers as fraudulent criminals.
“The downside of some systems is customers can be caught out. Banks believe that it is better for customers to suffer short-term embarrassment when their cards experience a problem than to find a fraudster has cleared out their accounts and they have nothing,” Apacs said.
The switch over to chip and PIN cost more than £1 billion, and card companies were hoping that it would seriously cut down on the £500 million they lose every year in fraud costs but so far this has not proven to be the case.
The Royal Bank of Scotland (RBS) recently announced that it would be issuing free chip and PIN card readers to all of its online bankers. The bank is following in the footsteps of Barclays, which is currently sending out over half a million readers to its online users.
RBS is hoping that the chip and PIN readers will reduce CNP fraud by adding a further level of protection to online transactions.
However leading IT security and control firm Sophos, has warned online bankers that, while the devices will reduce the risk of fraud by blocking spyware and phishing emails that attempt to steal internet passwords, they will not eliminate it.
“Hackers can still steal screenshots of what you are doing on your PC, and find out information about you and your account which could potentially be used for fraudulent purposes,” noted Sophos’ Graham Cluley.
“More sophisticated hackers can even develop ‘man-in-the-middle’ attacks that sit in between users and their banks, automatically capturing information in real-time and potentially sending unauthorized instructions to the bank while posing as the customer.”
