UK Credit Cards News

Paypass launched in the UK in September. The system works very much like the current oyster cards and is basically a touch and go pay system. You simply pass your card over a reader and your purchase is authorised. There is no need to input your pin number. To address security concerns the system will only be used for items costing £10 or less and after every 5 transactions you will be required to use your PIN.

In a reversal of market trends some card companies have been cutting their minimum repayment levels. That’s great you may be thinking, a little less that I HAVE to pay back each month. Well its not quite the giveaway it may seem. Cutting the minimum you must pay back increases the length of time a debt would take to be repaid if, like many, your only paying back the minimum balance for a period of time when perhaps finances are tough. The reality is the longer you take to pay off the full amount the more interest charges you will incur, and that means more profit for the merchants. So as the minimum payment lowers your total repayment increases if you just pay that amount.

Lloyds TSB are breaking ranks to become the first brand to announce the introduction of fee’s on its cards. From March 2007 customers that do not use their credit card will be charged a £35 annual fee. According to Lloyds, who have written to all its customers telling them of the change, this fee will alert consumers to the benefits of using their plastic. They could be the first of many companies to raise charges, for banking too, in the wake of the OFT’s clamp down on penalty charges.

Xmas 2006 was a record breaker for credit and debit card spending. Compared to the same period in 2005 spending increase by nearly 9% at £31 billion pounds, accompanied by a fall in the use of cheques for payment. This was against a backdrop of a fall on spending via our bits of plastic for the year as a whole.

From 1st February HSBC will start charging gamblers the cash transaction rate rather than the purchase rate for betting transactions.

The use of credit cards to make charitable donations has been increasing over the last couple of years. In January 2006 on average £75.55 per credit card was donated. Given that not everyone makes donation that actual amount per donation will be far higher. The trend has been accelerated by the number of rewards credit cards that automatically make donations on your behalf according to the amount of spend you make on normal purchases.

In Autumn 2006 consumer protection laws and agreements with credit card companies came into affect which saw the cost of extras fee's such as late payment and going over your limit reduced by around half to a standard with most brands of £12 or less. This affectively took out one billion pounds worth of income from the industry at a time where profit margins have become squeezed due to increased competition and pressure from consumer watchdogs. This means card brands will be looking for new areas to increase profitability. One such area now being looked at is the annual fee. Currently its almost the norm across the broad not to charge a annual fee, however this may change over the coming months. Look out for these charges starting to creep back in perhaps coupled with a minimum spend to avoid the fee. Also the area of balance transfers has become a hot potato of sorts. This once free facility now attracts a fee from almost all lenders and can vary enormously in cost as some choose to cap the amount chargeable and others not as well as the fee varying between 1-3% depending on the card you choose.

Almost half of all British adults (45%) are carrying around plastic that they haven’t used in the last 12 months. The average number of active credit cards is 1.2 per adult. Just 23 per cent of cardholders have more than one card they regularly use or that carries a balance. The study also found that cards with a reward scheme such as cash back, or reward are the most likely to be used for day to day purchases. Cards least likely to actually be used are:
• Cards with expired zero per cent
• Credit cards which were taken out with the cardholder’s main
• Credit cards attached to a reward scheme
From October 2006 credit card default charges have been slashed by up to 50% across the board. This is in response to the OFT's “statement of principles” on the calculation of credit card default charges. The big anomaly has always been that at the point consumers are least able to pay their outstanding balance they get hit with an extra charge for being in that position. Agreement was reached between the major players in the market that a £12 threshold limit on charges be set. Previously £25 and £30 charges were the norm.

Almost half of all British adults (45%) are carrying around plastic that they haven’t used in the last 12 months. The average number of active credit cards is 1.2 per adult. Just 23 per cent of cardholders have more than one card they regularly use or that carries a balance. The study also found that cards with a reward scheme such as cash back, or reward are the most likely to be used for day to day purchases. Cards least likely to actually be used are:
• Cards with expired zero per cent
• Credit cards which were taken out with the cardholder’s main
• Credit cards attached to a reward scheme

A new study has revealed that zero percent deals are no longer the most sought after deals by the UK consumer. The breakdown shows that of all cards held:
15% have reward points (over 50’s twice as likely as the under 50’s to have one these )
17% have a 0% deal
21% have cash back

perhaps most surprising is that 52% of all current cards have no special deals at all. However more than likely this reflects that when introductory offers lapse the consumer still retains that card.

Men are more likely to have a cash back card while women are more likely to have a reward point’s card.
As big rises in the cost of oil accelerates the rise in cost of fuel and associated products it’s believed this will see a doubling of credit card spending over the next three months. This would represent an increase from around £650 to nearly £1300 on purchases.
As big rises in the cost of oil accelerates the rise in cost of fuel and associated products it’s believed this will see a doubling of credit card spending over the next three months. This would represent an increase from around £650 to nearly £1300 on purchases.
The Office of Fair Trading (OFT) is looking into the £116 million pounds that consumers currently spend in fee’s and penalties for failing to pay off the credit card statement bill by the due date or going over the agreed limit. That figure represents 17% of all credit card consumers. Consumers are used to comparing headline offers but often ignore the difference in fee’s and penalties between brands.
2006 witnessed a new pattern in consumer debt as consumers began paying off credit cards, loans and overdrafts by re-mortgaging or increasing their current mortgages. The total amount of consumer debt continues to rise but the method of financing it is the significance here.

The UK is the grip of a borrowing crisis that at the amount has resulted in debt of over one thousand billion pounds for the UK populations personal debt. This has led to an investigation by the Banking Code regulatory body and the proposals they have now laid out. This involves a clampdown on how credit is scored and lending allowed. Particularly under the microscope is the practice of debt consolidation loans where several debts are rolled into often resulting in lower monthly payments but a greater overall total debt burden.

The Office of Fair Trading (OFT) has ruled that an agreement between MasterCard's UK members (the brand names that appear on MasterCard credit cards) on the default interchange fees charged on transactions made in the UK with MasterCard credit and charge cards infringed competition regulations. This relates to a collective agreement setting the fees linked to MasterCard transactions between March 1, 2000 and Nov 18, 2004 and that this restricted competition and breached EU and UK competition law.

Latest figures show a trend from the use of credit cards to the use of debit cards. In 2003 credit card spend was £37 billion and debit card spend was £33bn. In 2004 credit card spend was £33 billion and debit card spend was £39 billion. This also shows the use of plastic for financial transactions continue to increase although this was roughly in line with inflation.

25% of the UK population is now said to have been victims of identity theft at a cost of £2 billion a year to the country. Cases of attemp2ted fraud using cards where the identity of the true holder had been hijacked has risen by 13% while the actual increase in identity fraud itself is 7%.

Taking the view that current default charges applied to customers for defaulting on credit card payments is too high, the office of Fair Trading has written to 8 of the largest credit card companies to be begin a round of consultation. The outcome could be that the credit card companies will be pushed to lower the current level of charges. Currently charges are typically £20-25. While the OFT believe these charges hit those most least able to afford them, the credit card companies argue that these charges are necessary to encourage borrowers from defaulting.

Foreign credit card fraud using UK credit cards is currently at its lowest level for 5 years. In 2004 the level of fraud was £92,500,000 while in 2001 this was recorded as £134,400,000. It is thought the drop is due to improved security and detection now being employed credit card companies.

The latest trends in the UK credit card market is a move away from 0% balance transfers and a rise in demand for credit cards with low long term interest rates. As the number of consumers moving between 0% balance transfer deals has risen (termed credit tarts), cutting into the profit to be made by each brand, so companies have begun to start charging fee’s for each balance transfer. It is also possible consumers have begun to get more savvy about the pluses and minuses of such moves, notably introductory offers than end up with higher than average interest rates after the introductory period has expired.

Financial services information company Defaqto found last week that UK trippers spent a total of £30 billion on charges for using their credit cards abroad in 2004.

Credit card debt dropped in April 2005 for the first time in ten years with overall debt falling by £40m. Concurrently Visa said that it has seen the increase of credit cards issued begin to slow. At the same time the growth in debit cards has increased showing a clear trend towards affordable spending rather than spending on credit.

Its expected that figures for 2004 will show fraud on credit and debit cards exceeded £500 million. Credit cards stolen while in the postal system was £61.2 million and in part due to the increased number of cards being sent to customers to enable everyone to have a Chip and PIN credit card.

The UK Treasury Select Committee has been looking at how credit cards brand charge for their products and has criticised them over the way they apply interest. The problem is that there is no standard method of charging interest. You could be charged interest from the date a transaction was made or the date it shows on your statement. Again you could be charged interest until the day you pay a balance or the day the funds actually clear. These differences add up to cheaper or more expensive credit cards.

60% of UK credit card consumers which represents nearly 18 million people, have never taken up a balance transfer special offer.

Figures from the Morgan Stanley Card Index show UK Credit Card holders expect to make use of their card to the value of £730 for the first quarter of 2005 compared to a spend of £1,036 in the same period of 2004. This represents a drop of 30%.

38 years and 6 months after the first cards were issued in the UK spending with credit and debit cards has now exceeded the amount of cash transactions. Figures for this past year, 2004, show £269 billion was transacted with debit and credit cards compared to £268 billion of cash transactions. There are some 42 million credit cards and 85 million debit cards currently in circulation in the UK.

Since January 1st 2005 anyone with a chip and PIN credit card is required to enter their code into a chip and PIN terminal when paying for goods at a counter. If your credit card is not chip and PIN enabled you will still be able to use it and just enter your signature. However if it is chip and PIN enabled you will no longer have that choice.

Some credit card companies will treat online gambling deposits as cash advances possibly attracting higher interest rates and an advance fee.

Bank Leumi is preparing to launch a credit card aimed at the Jewish community. LeumiCard, which is owned by the Israeli bank Leumi, is trying to get a package together that would stop the credit card being used on Saturday, the Jewish day of the Sabbath. Whether this will actually be possible is yet to be announced.

On January 1st 2005 anyone with a chip and PIN credit card will be required to enter there code into a chip and PIN terminal when paying for goods at a counter. Currently you still have the choice between entering your code or signing an authorisation slip. This will change from the start of 2005. If your credit card is not chip and PIN enabled you will still be able to use it and just enter your signature. However if it is chip and PIN enabled you will no longer have that choice.

The UK's fraud prevention service, CIFAS, has reported that between January and September 2004 the incidences of identity fraud in the UK was 15% up on the equivalent period in 2003. Having someone steal your identity and take out a credit card in your name is an ever growing risk. >>>Read more about identity fraud.

The Bank of Scotland has announced it is dropping all affinity credit cards and has sold in excess of 100,000 affinity credit-card holders to the American credit card company MBNA.

From March 2005 credit card statements will come with a warning about only paying the minimum of your monthly outstanding balance which can mean paying huge amounts of interest over the longer term. Warnings about using credit cards as a form of borrowing rather than a means of balancing cash flow and a convenient way to pay will also be included. These changes have been agreed within the finance industry and follow on from the recent chnages to the regulation of finance advertising.

From January 1 2005, retailers that still accept customer's signatures instead of their PIN (personal identification number) codes will become liable for any credit card fraud carried out by those customers. This is a change from where the customers’ banks were responsible.

MasterCard have unveiled a credit card with inbuilt wireless technology at the Cartes 2004 conference in Paris. In practice this credit card, which also features chip and PIN, would simply be taped onto a reader and the transaction would be automatically completed. The consumer would need to nothing else and would immediately be on their way.

In 2003 spending on UK credit cards was £120 billion with £50 billion outstanding (still owing). It's interesting to compare this to 10 years, 1993, when spending on UK credit cards was at £30 billion with £10 billion outstanding. This means that while spending rose by 400%, the amount owing on credit cards rose faster, by 500%, that's 25% faster than spending. The number of credit cards in use in the UK in 2003 was 67 million.

PricewaterhouseCoopers (PwC) have expressed their opinion on the likely future of 0% and very low interest balance transfer rates popular with today’s credit cards. Currently Uk credit card brands are losing some one billion pounds with these headline grabbing introductory offers as they compete with each other for new customers. The problem they face is with the market now saturated with such offers the consumer can perpetually transfer their balance from one credit card to another an always maintain 0% interest. They predict a move away from these offers and instead a move to lower standard interest rates. Actually it’s expected there will be a two tier type credit card market. Low standard rates for consumers who are low risk and also for those who are heavy users of their credit card, with higher rates for those that represent a higher risk. There’s now a second reason for credit card brands to consider splitting cards into high and low rates. With the change in regulations they can only advertise a typical rate that is offered to at least 66% of applicants. This means by using one rate for all types of consumers they must advertise a higher rate than would be the case if they were not offering that card to the higher risk groups.

Changes in the regulation of financial adverts will have big benefits for the consumer by laying out standards for regularly used terms. These include the use of the headline typical rate figure which must now be more prominent than surrounding text and apply to at last 66% or more of accepted applications on that day. read more>>>