en-us http://backend.userland.com/rss Your Friends @ Myvesta.org.uk (stever@myvesta.org) myvestaukblog_archive.html stever@myvesta.org 115056168093592616 The UK credit card market has been shaken up by enforced cuts to penalty charges. John Greenwood tracks down the best bargains

Barclaycard is urging its customers to repay more than the bare minimum on their credit cards and is offering them lower interest rates to encourage them to do so.
Credit cards

The credit card company, which has more than 11 million customers, is including a new message on statements for cash--strapped cardholders who have paid off only the contractual minimum of two per cent of their balance for six consecutive months.

Barclaycard customers repaying more than 10 per cent of their balance sees their interest rate fall from 16.9 to 9.9 per cent.

The move comes 10 days after Barclaycard said it would reduce its penalty charge for late payments on credit cards from £20 to £12 following a ruling from the Office of Fair Trading. HBOS, Royal Bank of Scotland and Lloyds TSB have followed suit, while last week Morgan Stanley and Co-op hinted that they too would slash penalty fees.

Experts say the strategy of urging customers to clear their debts reflects a change in tack for credit card issuers, which will have to find new ways to recoup money now that they can no longer profit from hefty default charges.

Barclaycard swiftly increased the interest rate it charges on cash advances by up to 5 percentage points to a massive 29.9 per cent - a clear message that intends to get the money it is losing on penalty charges back somehow. Experts predict that other banks will follow suit with higher interest rates across their product ranges, so it is more important than ever to shop around for the best deals.

"Now they can't make money out of defaulters we expect a surge in marketing initiatives to make you use your credit card more, such as cashback deals, so credit card companies make more in merchant fees," says Brian Brown of Defaqto, the financial analysts.

"We also predict that interest rates will go up and introductory offers will become less attractive, although the reintroduction of annual charges for credit cards is unlikely because as long as one company offers free cards, the rest will have to as well."

Despite fears that deals may become less attractive, there are still some fantastic offers available. Credit card deals come in all shapes and sizes. Making sure you get the right card will save you pounds and give you more spending power.

Here are the best deals for every kind of cardholder.

I have no debts and want a card that gives me as long as possible to pay without charging me interest.

GE Money's Transformation card tops the tables, charging no interest at all for the first 12 months that you hold the card, then switching to an annual percentage rate (APR) of 12.9 per cent. Sainsbury's Bank's Platinum card offers 12 months at 0 per cent interest on purchases, reverting to a slightly more expensive 15.9 per cent APR thereafter.

I don't want the hassle of changing credit card just to get the best introductory offer. I want a card with a reasonable rate of interest if I can't afford to pay my bill off at the end of the month.

The cheapest standard rate credit card is Halifax's Flat Rate card, which charges an APR as low as 5.9 per cent, which is cheaper than many personal loans, although only people with good credit ratings will be able to get this card. American Express's Blue is also competitive, charging just 6.9 per cent APR.

I have a large credit card debt and my current 0 per cent deal is coming to an end, so I need to find a new deal.

There are currently no cards on the market that allow you to transfer your balance to a 0 per cent deal without paying a fee.

The Halifax One card is the best value for balance transfers under £2,500, charging you 0 per cent interest for the first 12 months on debts you bring over from other credit cards, with a one-off balance transfer fee of 2 per cent. It then reverts to an APR of 15.9 per cent.

GE Money's Transformation card offers the same 12 month interest-free period for balance transfers, but beats the Halifax One card for transfers over £2,500 because although its transfer fee is 2.5 per cent of the sum brought over, it is capped at £50. It also beats the Halifax card on its standard APR of 12.9 per cent.

Watch out for introductory offers as most credit card companies choose to allocate payments first to outstanding balances at the lowest rate of interest, such as 0 per cent balance transfers, leaving transactions that attract higher interest rates, such as purchases and cash advances, to continue to accrue -interest.

I always pay off my credit card in full and want a deal that rewards me for spending on my credit card.

Morgan Stanley has the best cashback credit card on the market for low to moderate spenders. Its Platinum Credit card gives you 2 per cent cashback for the first £2,000 you spend, and 0.5 per cent thereafter.

American Express's Platinum Credit card gives you more cashback the more you spend - 0.5 per cent up to £3,000, 1 per cent up to £7,500 and 2 per cent for spending over £7,501.

The Telegraph
June 9th, 2006
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