Summary boxes shunned by credit card lenders

The majority of credit card lenders do not put summary boxes detailing the basic rates charged by cards, on their monthly statements. However, while only a few credit card lenders include this information two out of three people think they are a good idea, new research from Halifax credit cards finds. "Customers need to be aware of the rates and charges applicable to their particular credit card. Summary boxes make this possible," said Ian Corfield, head of Halifax Card Services. "Although many lenders feature summary boxes in their marketing literature, many fail to include it on their credit card statements."

Currently credit card lenders including Nationwide, Barclays, Halifax, and egg have summary boxes on their statements, but other lenders have said technological challenges mean they could not be introduced until 2006. And this attitude has been criticised by an influential group of MPs. The Treasury Select Committee said the introduction of summary boxes on statements: "Is essential in ensuring that consumers are kept informed of the key interest rates and charges of their credit cards and are properly equipped to shop around and determine whether they could obtain a better deal elsewhere.

"We do not believe consumers should have to wait until the middle of 2006 for the summary box to be introduced on monthly statements in a consistent manner across all of the industry." And today Halifax added its voice to the call. Mr Corfield said: "Summary card boxes are an essential tool in the comparison of credit cards. Customers can only benefit from their introduction. We're calling on all lenders to introduce personalised summary boxes as a matter of urgency."

As an example, Halifax points out that its credit card statements include the following information in a summary box on the front page:
- Their own credit limit and available credit
- Last month's payments and credits
- Interest rates for balance transfers, purchases, cash and cheques
- The appropriate interest free period
- The minimum payment required and payment date together with a 'health warning' about making only the minimum payment
- Cash advance fee - if applicable
- Any fees and charges which are applicable
- How payments are allocated
- Next month's estimated interest

Q&A: credit card charges

Joe Morgan, of Times Money, on the costs and charges facing credit card companies after the Office of Fair Trading's ruling

What are the credit card charges that the Office of Fair Trading has ruled to be unfair and "disproportionately high"?
If you fail to repay your monthly outstanding credit card bill on time or exceed your agreed borrowing limit, credit card companies will hit you with penalty charges which are typically between £20 and £25. The consumer watchdog says that these penalty charge are too high, on the grounds that they are "more than a genuine pre-estimate of the damages that the card issuer would win in court if it sued the cardholder for breach of contract." Consumer groups point out that the costs a lender incurs if a cheque fails to clear in time are minimal: a late payment letter is automatically generated and the additional charge is simply added to a customer's bill.

Who are the offenders?
The OFT has written to eight major credit card companies, which include Barclaycard, Royal Bank of Scotland, HSBC, Lloyds TSB, Capital One and MBNA. The vast majority of card companies levy default charges. Nationwide Building Society has a more moderate approach, charging borrowers £15 if they pay late or exceed borrowing limits.

Do the credit card companies accept the OFT’s ruling?
No. The card companies maintain that the charges are fair. They maintain that they are presented to consumers in an upfront and transparent way.

What happens next?
The card companies have three months to respond to the OFT’s ruling. The watchdog then has powers to take card issuers to the High Court to force them to reduce their fees.

Do the banks have much to lose on this issue?
Yes. Research by Which?, formerly known as the Consumers' Association, estimates that credit card companies make £400 million a year from late payment and over-limit charges.

How can I avoid these penalty fees?
One way to guarantee you will not be stung is to set up a monthly direct debit which pays the minimum payment on your credit card. But it pays to clear your balance in full each month to avoid paying interest on your card account.

Credit card advice site launched

The credit card industry has launched its own website to help people choose which card is right for them and avoid building up excessive debt. The site, called "choosing and using", advises people what sort of credit card best suits their spending behaviour. It also offers help for people already experiencing credit card debt, but it does not compare specific cards. With around 1,500 credit cards available in the UK, choosing the right one is not always an obvious decision.

The site was set up by Apacs, the UK payments association, which represents all of the major UK credit card issuers. The website gives the type of features people should be looking for depending on their spending behaviour. For example people who clear the balance each month are advised that the interest rate is less important, and that they should concentrate on whether there is an annual fee and any rewards programme. There is also advice on what to do if people have run up too much debt on their credit card. But the website does not look at specific cards. BBC personal finance reporter Richard Scott says people are still likely to need comparison tables in newspapers or on the internet in order to make their choice.

Fee-charging ATMs given all-clear

Fee-charging cash machines (ATMs) are aiding rather than hurting consumer choice, the government has said. The government welcomed the spread of over 20,000 fee-charging ATMs as convenient and not posing a threat to the free-to-use machine network. But it added it would monitor fee-charging ATMs to ensure that they did not replace free-to-use machines. The government was responding to a critical Treasury Select Committee report into fee-charging ATMs.

In March, the MPs called for clearer warnings on fee-charging cash machines. The committee expressed concern that fee-charging machines tended to be located in poorer areas of the UK, often in places where traditional High Street banks have left. Overall, consumers now pay £140m a year to access their own money, the committee's report concluded. According to the Association for Payment Clearing Services (Apacs), more than four out of 10 UK cash machines are now operated by independent firms, nearly all of which charge a fee for withdrawals. In general, consumers using fee-charging ATMs are charged £1.75 to withdraw cash. But in its response to the committee's report, the government said that the vast majority of fee-charging ATMs were in locations where there had never been a free cash machine. However, the government stressed that cash machine charges should be made clear so that consumers could make an informed choice.

The government's response was described as "disappointing" by opponents of fee-charging ATMs. "Consumers will pay more than £200m this year to withdraw their own money from cash machines," said Stuart Bernau, Nationwide Building Society executive director. "We believe that without government action we could be looking back in five years and saying: 'Remember when access to cash was free?'" Consumer group Which? branded the government's approach as "see no evil, hear no evil". The government's comments came as the Post Office announced it was to install 1,000 free cash machines after signing a deal with the Bank of Ireland. The Post Office had been singled out for criticism in the Committee's report for installing charging ATMs in its branches.

Travellers warned over credit card charges

Holidaymakers are being warned to watch out for expensive charges when using their credit cards abroad. It follows a moneyfacts.co.uk poll that revealed while 69 per cent of consumers use their credit card abroad, 67 per cent of them do not know how much they are charged for them. On average, the so-called 'loading' charge for foreign usage weighs in at 2.75 per cent, which equates to £27.50 in fees for every £1,000 spent. However, those that opt to withdraw money overseas are charged an additional cash withdrawal fee, which averages an extra two per cent. "It is worthwhile consumers checking what they will be charged by their card provider before setting off on their travels, as this will help to prevent them returning to find a nasty surprise on their credit card statement," commented Samantha Owens from moneyfacts.co.uk. Naming the providers who topped the best deals chart, she said: "Nationwide BS bucks the trend with no foreign usage loading and a lower cash withdrawal charge of only 1.5 per cent." She added: "Liverpool Victoria offers the same deal as long as the customer uses their card within the EU."