Creditcard Guide Blog

Nationwide campaigns for positive order of payment

2007-12-12T10:45:24Z

The vast majority of all credit card providers operate a negative order of payment, meaning that your monthly repayment is used to pay off the cheapest debt first, leaving such items as cash advances (which attract a high interest rate), to accrue yet more interest. This may be good news for the provider’s profits but it’s certainly bad news for the consumer.

The Department of Trade and Industry (now known as the Department for Business, Enterprise and Regulatory Reform]) has announced that as of 1st October 2008 all providers will have to make clear to the consumer how the repayments are allocated. The following words must, by law, appear on each statement from next October: “If you do not pay off the full amount outstanding we will allocate your payment to the outstanding balance in a specific order, which is set out. The way in which payments are allocated can make a significant difference to the amount of interest you will pay until the balance is cleared completely."

Nationwide claims to be the only credit card provider currently operating a positive order of payment and is campaigning to have other providers follow their example. They do not feel the DTI proposals go far enough and would like to see the statutory message preceded by the word “Warning,” as well as having the rates set out in the same place as the message, so that consumers do not have to go hunting for the information. They would also like the message to appear only on statements where the negative order of payment is relevant to the customer.

The divisional director of Nationwide, Jeremy Wood, says: “Many credit card providers use low introductory rates to lure people into opening an account. These offers can look very appealing, but when you scratch beneath the surface you discover that credit card holders often don’t receive the full benefit of these low rates.”

The "0% on balance transfers" is a common carrot dangled at the consumer, but an example of the type of situation where Jeremy Wood feels that consumers should be exercising caution. For example, if you were to transfer your balance across and withdraw £100 in cash you would receive a statement showing the balance transfer and the £100 cash withdrawal. If you paid off the £100, knowing that it attracted interest, and did not use your credit card again, you may be surprised to receive a statement the following month, still showing the £100 cash withdrawal (notching up interest) but a reduced amount on the balance transferred.

66% of us think it is important to find a credit card provider who operates a positive order of payment, and yet 69% of us do not have a clue as to how our own repayments are allocated. Nationwide reckons that this ignorance, combined with a large dose of apathy, costs us a staggering £500 million a year. The average person keeps the same credit card for six years, regardless of whether or not they are getting a good deal, and armed with this knowledge, there seem to be a lot of providers out there who are using this to their advantage.

First Alert from Lloyds TSB

2007-12-07T15:34:22Z

The experts say that using plastic is safer than cash, and that card fraud is actually less common that it used to be, thanks to the introduction of the Chip and PIN system. However, fraud is on the increase - by 16% in the cases of “card not present” transactions (for example internet, mail order and telephone sales) - and cases of card cloning are up by 3%. According to the UK’s Fraud Prevention Service, it takes an average of 201 hours to unravel the harm done by card thieves, so the thought of someone getting their hands on our card details is understandably worrying.

For customers of Lloyds TSB it seems that help may be at hand in the form of their First Alert service. This is the first of its kind to warn customers by automated phone call of the possibility of suspicious activity on their current account.

The service for credit card holders has been available since 2005, but earlier this year the bank decided to extend it to holders of debit cards. It means that valuable time will not be lost in recognising fraudulent transactions and will help customers negotiate the red tape involved when things do go wrong. Gerrard Schmid of Lloyds TSB, explained: “The system proved a huge success on credit cards and by extending it to our debit card customers we're planning to crack down further on card fraud... the expansion of our 'First Alert' system to debit cards, will be a real asset.”

The call to the customer asks whether they recognise the transaction and, if they can confirm that all is well, that is the end of the matter. If, however, they are unable to give the all clear, they are put through to a Lloyds TSB employee who will assist them in making arrangements to freeze the account and obtain a refund for the fraudulent transaction. The system used, combines Lloyds TSB’s own fraud detection technology and a system provided by Adeptra, experts in the field of automated contact and resolution services for Consumer Credit and Risk Management.

Halifax launches multi-currency ATMs

2007-12-07T03:27:22Z

Halifax has become the first high-street bank in the UK to launch multi-currency ATMs that will allow customers to withdraw cash from a current account or credit card in Euros and US Dollars. The machines will accept Visa and MasterCard credit and debit cards, dispensing Euro and Dollar banknotes in denominations of 20 at a competitive rate of transfer. Halifax customers and those with other banks will be able to use the ATMs, which charge a 0% commission rate. However, non-Halifax and Bank of Scotland bankers will be forced to pay a charge to use the service, in accordance with their bank's terms and conditions.

The first multi-currency ATM was installed at the bank's Old Broad Street branch within the City of London. Plans are already under way to set up more such machines around Britain. So far, Halifax has confirmed machines for Cannon Street in London Strand, London Fleet Street, Basingstoke, Chester, Dumfries, Southampton and Windsor. More will be rolled out during the next few months.

"Our customers have told us that the immediate availability of foreign currency would be a valuable addition to the wide range of services we already offer, and we plan to roll out more of these multi-currency ATMs in the near future," explained Nigel Turkington, head of travel money at Halifax.

The machines, which are provided by Travelex, should prove popular with people looking to secure their travel money quickly and easily, particularly those going to the US, as the Pound continues to look strong against the US Dollar.

This summer, Tesco Personal Finance started a similar scheme, placing special Euro ATMs in selected Tesco supermarkets around the country. It proved so popular that the company quickly decided to up the number of machines to 20. Customer responses showed that people were especially taken with the fact that they could get their holiday money while doing their shopping.

Steward Gow, head of ATMs at Tesco Personal Finance, explained that convenience is the main appeal of multi-currency ATMs, noting that those placed near UK transport hubs are proving to be the most popular.

"We want to make travel money accessible for our customers. They can pick up their Euros at a competitive exchange rate at no charge whilst they do their weekly shop which is convenient. It's an easy way for customers to get their holiday money," he said.

"Initial customer feedback has been really positive with the emphasis on convenience. We want to improve our customers' experience every time they deal with us and this trial will help us further understand their needs."

The Tesco Euro ATMs can be found at a number of stores, including Ashford, Gatwick, Long Eaton, Altrincham, Glasgow, Bury, Hemel Hempstead, Chester, Finchley, Aylesbury, Port Glasgow, Dover, Hatfield, Andover and Newton Abbott. There are also five ATMs dispersed across Northern Ireland.

Ditch your charity card and donate your cashback!

2007-10-16T10:53:03Z

Back in July, we gave you a round-up of the best charity cards on the market. Charity, or “affinity”, cards are certainly popular and the better ones raise substantial sums of money for good causes. And yet...with a wide range of cards offering cashback, you could benefit your favourite organisation even more by directly donating cashback “earnings” to the charity.

The most generous charity credit cards donate more than 1% of your spend to the charity, as well as making a one-off donation, typically £20, when the card is first issued. A card like the Halifax NSPCC Charity Card is more typical, however, with 0.25% of all purchases donated by Halifax to NSPCC. So, if you spend £3000 on your card in the first twelve months, the NSPCC will receive a funding boost of £35 (the initial £20 donation plus £15). It hasn’t cost you anything, but it’s not a huge amount of money all the same.

Currently Abbey is offering up to £50 cashback with its credit card. You earn 5% cashback on the first £1,000 spent on supermarket shopping before the end of January 2008.
A Capital One cashback card lets you earn 4% cashback on purchases in the first 3 months, dropping to 1% on purchases thereafter.

[http://www.barclaycard.co.uk/products/apply/platinum.html?TC=AAHFA10918 Barclaycard Platinum Cashback Credit Card offers 2% cashback on petrol and supermarket shopping, and 0.5% cashback on any other money spent.

A further advantage of donating cashback is that you can deal directly with the charity, and sign up for Gift Aid, so that the organisation can reclaim this tax to increase the value of a donation. Currently, hardly any credit cards automatically add Gift Aid on top of the percentage donation from your spend. The “donate as you spend” Hope for Children Mastercard is one of the few that do.

Ultimately, if you think you wouldn’t get round to making a donation directly, then a charity credit card may be an effective way of giving. Affiliating with a bank does also help raise the profile of a charity – something which in itself often helps the charity by boosting awareness and financial support. However, if you’re disciplined enough to do it, saving your cashback and donating it directly could do a lot more than a run-of-the-mill charity card.

New warning over hotel check-ins

2007-10-12T11:14:08Z

A new problem with using credit cards for hotel check-ins has been highlighted in recent weeks. There is a chance that you could go over your credit limit without knowing - simply because you checked in at a hotel.

It is a common practice at hotels, but many people do not even realise what is happening to their credit card at check-in. When your card is initially swiped, what is really happening is that a sum is reserved from your account to cover not only the full cost of your stay but an estimate of any extras. So, for example, supposing you are agreeing to stay in a hotel room for £100 a night, it is not uncommon for the hotel to reserve almost double that price on your account in order to make sure you have enough funds for extras such as meals, in-room movies, and so on. This earmarked total sum is unavailable for your use during your stay and the earmark is only lifted when you finally check out and your hotel processes your final bill.

This process of earmarking in itself seems very dubious as it seems to be another way of claiming a deposit, often without the customer knowing. It could also run you into serious credit troubles.

Picture this scenario: a customer might check in to one hotel, where their credit card will be swiped and the funds earmarked. Before ever incurring a charge the customer cancels the booking and checks in to another hotel where the credit card is once again swiped. The card fails because there is not enough credit left as each hotel had pre-authorised a certain sum to cover an estimated cost of the stay, each sum being earmarked and therefore reducing the available credit.

Even though the process of hotel pre-authorisation is in much dispute, APACS, the body that regulates credit cards, confirmed that it was a standard practice, with hotels often pre-authorising an unrealistic amount before the stay. This is usually not an issue after check-out has occurred, but of course it can seriously disable your finances before check-out and therefore can be a serious problem. Not only are the pre-authorisation charges often unreasonable but the customer is not informed that this is happening.

Sandra Quinn of APACS insists that hotel customers should stay aware of what is happening to their accounts. It is important for everyone to make sure that they are asked to sign or authorise an amount before any sum on the account is earmarked.

Credit card cheques - convenience at a price

2007-10-09T11:03:51Z

Have you received credit card cheques from your card provider recently? If you have, you are certainly not alone. Thousands of UK consumers are being tempted to cash in this type of cheque without being fully aware of the costly consequences, according to Which?, the consumer champion.

Credit card cheques allow you to make payments using your credit card account in situations where cards themselves are not accepted. They sound like a good idea in theory, but they are expensive. The Office of Fair Trading (OFT) declared in April 2006 that “credit card default charges ... have generally been set at a significantly higher level than is legally fair.” The maximum penalty fee was set at £12, and thousands of consumers have subsequently, successfully reclaimed card charges. Meanwhile, according to consumer organisation Which?, credit card providers have been trying to rack up the cost of their other services to try and offset the sudden loss of income.

Which? Money Editor Martyn Hocking said, “Credit card providers seem to be resorting to a raft of ingenious methods to recoup lost revenue following the OFT crackdown on penalty fees.” This includes credit card cheques.

Although the terms and conditions must be clearly stated by the credit card company, industry specialists are concerned about the volume of unsolicited cheques which are currently being sent out to customers, who are often ignorant about this form of payment. Many customers don't realise that these cheques attract higher interest rates than a "normal" credit card transaction. Because credit card cheques are not sent out in a book, but singly or as a sheet with multiple cheques, they can be harder to keep track of – and therefore an easy target for fraudsters.