What's so bad about "Rate for Risk"?

nzseries1

Hello,

I've heard people on this forum (and Martin himself) say that they think "Rate for risk" should be illegal. That, if I'm not mistaken is where you apply for one card but get offered another.

My question is, why is this so bad? I can clearly see why it's bad for stoozers, but for the general public, if you apply for a card and get declined, then what's better? No card at all, or an offer of another card? Even if you turn down the second card, you've only got the 1 new search on your credit profile, which you would have had even if you weren't offered the second card.

My flatmate applied for a BarclayCard, and he got a letter saying "We can't issue you with the card you applied for, however if you would like you can have a BarclayCard Initial". He was in fact happy that he didn't have to apply a second time!

So... what's so bad about this?
Thanks in advance.

Troubled_Joe

Sounds fair to me

Saucepot

Whats so bad about it is that such a practice is a con. Like a travel agents window that offers a holiday for £199 and when you go in to buy the bargain its been sold but you can buy a holiday to the same place but thats £599.

The company are advertising a product and its that product you are applying for. Offering you a poorer product is a bit off.

A_fiend_for_life

The down side is if you get offered another card and you don't like the alternative either because of the interest rate or extras then you'd need to apply elsewhere.

I am new to the credit card forum but I wonder if any folk have been moved to a better rate. I think I read that a certain percentage of customers should receive the headline rate but you are more likely to be offered more than less I would imagine.

Also I don't know what the rules are on being offered a higher interest credit card: is the headline rate for the original card or the alternative card?

I agree with you if you get a card that is not as good but not that bad either and it saves another search thats good. Also if you pay the balance in full every month it might be fine. Though generally I still feel it is stacked in the card issuers favour.

If your not credit worthy for the card you applied for I don't think you can be credit worthy for a higher interest card. Not sure how it stands legally but it should constitute irresponsible lending in my mind.

Personally I would keep copies of the original documents or photocopies if necessary,
accept the card then cancel within the cooling off period. Then start on their complaints procedure or contact OFT.

Moggles_2

Saucepot wrote: »

What's so bad about it is that such a practice is a con. Like a travel agents window that offers a holiday for £199 and when you go in to buy the bargain it's been sold but you can buy a holiday to the same place but that's £599.
The company are advertising a product and it's that product you are applying for. Offering you a poorer product is a bit off.

What's more, judging from posts to this board, many are unaware that another deal has been substituted, until the card and paperwork arrives in the post!

Moggles_2

nzseries1 wrote: »

I can clearly see why it's bad for stoozers, but for the general public, if you apply for a card and get declined, then what's better? No card at all or an offer of another card?

In my view it's the general public, not the stoozers (who are mostly clued up and know the score) that are vulnerable. If you're paying crippling interest rates on a debt, the last thing you need is several more weeks of wasted time and effort, because your chosen lender sent you a substitute card, which is just as expensive.

Currently, Barclaycard, Cap One and Citi are the chief offenders and the worry is that if they're allowed to get away with it, the practice will spread.

Saucepot

Moggles wrote: »

What's more, judging from posts to this board, many are unaware that another deal has been substituted, until the card and paperwork arrives in the post!

well in that case its an outright con. Like ordering a case of cristal and recieving a case of cava. I'm surprised trading standards would accept that.

Moggles_2

Saucepot wrote: »

well in that case its an outright con. Like ordering a case of cristal and receiving a case of cava. I'm surprised trading standards would accept that.

I think you'll find they've well and truely covered themselves in the Ts & Cs. :rolleyes:

Barclaycard, for instance, reserves the right to issue the credit card it deems most suitable from its range. In the worst cases you can be sent a totally unsuitable card, leaving you no further forward and with a wasted search on your credit file. Judging from complaints to this board, this happens frequently so, before you apply to B'Card, C1 or Citi, it's important to consider whether you’ve a realistic chance of being accepted for the card that you want.

IMO, this practice should be banned, but unfortunately we're stuck with it for the forseeable. At least, as things stand, we can vote with our feet

nzseries1

Saucepot wrote: »

Whats so bad about it is that such a practice is a con. Like a travel agents window that offers a holiday for £199 and when you go in to buy the bargain its been sold but you can buy a holiday to the same place but thats £599.

The company are advertising a product and its that product you are applying for. Offering you a poorer product is a bit off.

Thanks everybody, you've all made me look at this a few different ways.
The post I quoted here helps me understand it the most, thanks Saucepot. I HATE it when the travel agents say "New Zealand from £500!" and I say "so when can I go?" and they say "you can't, there are no flights."

Scousebird_2

Notice the term ''subject to status'' on ads???

Rabiddog_2

Shouldn't they be made to write back and ASK if you would like the alternative card? that leaves you free to accept or decline, and free to shop around in the meantime.