"Credit card holders could face annual fees" - The Guardian

Rafter

nitrocat,

Should banks make a loss on you though and have to charge everyone who chooses to borrow on a credit card (including the ones who can manage it sensibly) more?

If you want a months interest free credit, cashback and insurance against fraud, should you not pay a fee or do you think the retailers should pick up the bill?

The Office of fair trading thinks that they shouldn't and is planning to reduce the fee the banks get when you use the card.

Debit cards will still be free though with the retailers picking up a small cost for processing which is less than the cost of processing cheques or paying securicor vans to move cash around.

Banks really won't care about losing custom if you are not making them any money.

I agree, allowing people to have 11 cards and to borrow more than their annual income is totally irresponsible and needs to be stopped.

Also think that one group paying 0%-4% for their borrowing and another paying 15%-30% doesn't seem very fair either. But it is the situation that is keeping this website and others like it going for as long as the offers and this disparity in pricing for credit cards, loans, flights and other deals continues.

R.

michaels

Who said life is fair - I get insurance, CDs etc cheaper cos I shop on line - is it unfair that other people pay full retail price on the high street. If some people dont get their act together and pay high interest on their credit card borrowings does someone need to intervene to make sure this is fair? May be the government should be the only issuer of credit cards and everyone should face the same terms and conditions, and why stop at credit cards, why not regulate housing, salaries, everything else in life. if having choices mean some people end up being worse off and this is judged unfair then lets take away all those choices - fair enough?

nitrocat

Rafter wrote:

nitrocat,

Should banks make a loss on you though and have to charge everyone who chooses to borrow on a credit card (including the ones who can manage it sensibly) more?

If you want a months interest free credit, cashback and insurance against fraud, should you not pay a fee or do you think the retailers should pick up the bill?

The Office of fair trading thinks that they shouldn't and is planning to reduce the fee the banks get when you use the card.

Debit cards will still be free though with the retailers picking up a small cost for processing which is less than the cost of processing cheques or paying securicor vans to move cash around.

Banks really won't care about losing custom if you are not making them any money.

I agree, allowing people to have 11 cards and to borrow more than their annual income is totally irresponsible and needs to be stopped.

Also think that one group paying 0%-4% for their borrowing and another paying 15%-30% doesn't seem very fair either. But it is the situation that is keeping this website and others like it going for as long as the offers and this disparity in pricing for credit cards, loans, flights and other deals continues.

R.

Yes borrowing should cost more, people will be less inclined to do it then. Read the resulting heartbreaking situations in the "Debt free want to be" forum if you disagree.

Interest free is encouraging borrowing and is not representing the risk correctly. If I want insurance I should pay for it. Cashback is plainly expensive borrowing and should be high interest/discouraged.

With the banks loose lending credit cards have become an abomination and a trap for the unwary. Banks have nothing to lose by lending to high risks because the Bank of England will bail them out if they go bust, where is the incentive for them to act prudently?

If they apply an annual charge then the CC will go as I have no need for it.

Ditch the credit card and live within your means and have a happier life. Better still ditch all debt.

N

Rafter

N

Thanks for your reply.

Personally I think a credit card market where your limits were capped at 2 months salary and with a <10% APR, 5% minimum repayment and an annual fee of say £20 for non-borrowers would be fair.

Full payers still get access to all the guarantees and insurances that a credit card provides, and an ability to get a months free credit. The £20 fee means that the cost of statements and some of the fraud costs are being covered, so these customers are not being subsidised by borrowers.

People who aren't good at saving, can still get access to credit to replace washing machines or pay one off bills that hit them or afford to go on holiday and pay back the cost over a few months.

The APR is reasonable, but is slightly higher than unsecured loans to reflect the flexibility of the product.

A 5% minimum repayment means that no debt is on the card for more than about 2 years - quite enough and certainly a lot less than the 40 years it takes to repay some current cards when payment protection insurance is included.

A system which allows someone to get 11 cards with limits about 200% of their annual salary is clearly broken, irresponsible and wrong. Why aren't the government and office of fair trading sorting it out though? Forcing banks to share all their information with each other? Capping the amount of debt anyone can have if banks can't control it themselves?

Apparently 3/4 of people defaulting on their borrowings aren't suffering from divorce, bad health, unemployment. They have simply lived beyond their means and have decided to walk away from their debt. And who picks up the bill? Other bank customers by way of higher interest rates on debt and lower interest on savings - not fair!

It would be good if someone with influence was beating up the government about this and preventing people getting into ridiculous amounts of debt in the first place. Personally I think that chronic debt is just as big a deal as poor school dinners, which a bit of pressure from Jamie Oliver seems to have solved.

R.

JohalaReewi

Charging an annual fee to people who manage to pay off the CC each month but not charging an annual fee to people who run up debt (and pay interest) doesn't seem fair either. It seems to be rewarding people who owe CC companies huge amounts of money. Amex seem to have a fair system. If you don't use the card enough, you pay an annual fee.

westernpromise

michaels wrote:

Who said life is fair - I get insurance, CDs etc cheaper cos I shop on line - is it unfair that other people pay full retail price on the high street. If some people dont get their act together and pay high interest on their credit card borrowings does someone need to intervene to make sure this is fair? May be the government should be the only issuer of credit cards and everyone should face the same terms and conditions, and why stop at credit cards, why not regulate housing, salaries, everything else in life. if having choices mean some people end up being worse off and this is judged unfair then lets take away all those choices - fair enough?

Completely agree with you on this, michael.

If someone passed a law saying no more 0% deals because it's unfair to the lazy, who can't be bothered to seek out the deals for themselves, what next? Will the government force all deposit account providers to pay the same rate, because it's unfair to lazy savers that they get 2% at Bank X while I get 5.4% at ICICI because I went out and found it?

All competive activity by service and goods providers is aimed at improving their bottom line. All of it carries a cost. Whether it's 0% intro deals, or TV ads, or prize competitions, the cost is borne by the company and passed on to customers as it sees fit and to the extent that it can manage.

That decision is usually based on risk. I am a good risk so I get cheap deals. If everyone had to be given the same deal, that would necessarily mean bad risks got the same terms as good risks. They would then default, but since the risk they represented was not factored into the cost of their credit, the lender would lose money, and so everyone's terms would have to be worsened to fund the losses.