Cinemas, travel companies and airlines have lead the way with credit card charges. Unfortunately for many consumers, this trend appears to be spreading to other sectors, including local councils.
According to Which? a number of local councials are adding additional charges on customers who opt to pay via credit card.
The report shows that around 55 councils were applying credit card charges, with at least 12 adding more than 2% to the cost of services provided. More worryingly, two councils were even charging for debit card as well as credit card transactions.
Local council authorities have attempted to explain that they are “simply passing on a charge levied by banks for processing credit card payments.” However, it appears that a number of them are also adding an administration fee on top of this.
James Daley, Editor of Which, commented:
“There’s certainly a cost for paying by card. But there’s also a cost to every company to keep the lights on and we don’t see an extra charge for that.”
Mr Daley went on to add that the cost of paying by card should be worked into the price paid for the service.
Visa and Which? have both called for the charges to be removed entirely from credit card payments. Visa has suggested that it is actually more expensive for councils to process cash and cheques over credit cards.
An overwhelming 107 members of parliament (MPs) have backed a campaign calling for the British Government to put an end to “legal loan sharking.” The MPs from all three major parties signed a petition to cap the excessive interest rates charged on the more expensive types of credit, such as payday loans and logbook loans.
Consumer campaigning group, Compass, have said that they welcome the Government’s pledge to give regulators such as the FSA and OFT new powers to define and ban excessive interest rates on credit cards, it is still failing to tackle the worst offenders such as payday loan and logbook loan lenders.
In some instances rates charged on payday loans can be anything in excess of 1,737% or higher. Logbook loans are also notorious for charging excessively high interest rates and, in a few cases, can charge around 437%. For example, if you borrow £1,500 you could end up paying back more than £4,000 after the full-term of 78 weeks.
It should also be noted that since payday loans are only borrowed over a period of a month, and not over a lengthy period of time the actual repayment after this terms only works out to around £20 – £25 for every £100 borrowed. In some instances it could be even less than that.
General Secretary for Compass, Gavin Hayes, commented:
“A cap on the cost of credit is supported by seven in 10 people and it now also has support from all sides of the House – it is clearly an idea whose time has come. We’re confident that the Government will do the right thing and protect our most vulnerable citizens.”
According to a recent report by campaign group Compass and Trident Reach, British consumers are fully supportive of moves to tighten the conditions personal loan and credit card companies are allowed to apply to their products.
The study showed that around 68% of the people surveyed are eager to see the Government introduce a rate cap on all types of lending, from mortgages and personal loans to credit cards.
In addition to this the report suggested that 7 in 10 British consumers are in favour of having access to alternative sources of affordable of credit, including credit unions and even a Post Office bank.
With high interest rates being applied across a number of financial products available on the market during a time of economic uncertainty and access to lending still quite restrictive, many are welcoming this motion by the Government. However, Gavin Hayes, General Secretary of Compass, believes that the plans for lending and credit reform“do not go far enough.”
Mr Hayes went on to add:
“The public feels that just capping excessive credit and store card rates falls short. They want caps on the cost of credit to cover the whole of the unsecured credit sector that causes so much misery for thousands of people in the UK that can least afford it.”
One of the other main causes for concern is lack of regulation around other financial products, such as payday loans, pawnbroking, home credit and other unsecured lending products. Many politicians, celebrities and campaigning groups are calling for tighter regulations around this sector.
More and more people are turning to cash or their debit and credit cards over cheques, which are due to be phased out over the next 8 years or so, with a target date of October 2018.
The report suggested that cheque usage dropped by well over £21 billion, which is down by a tenth over the second quarter of 2010, compared to the same period in the previous year, as more people switch to faster and more convenient methods. In spite of this, credit card spending wasn’t as strong as expected over the second quarter, which rose by around 3.9%, which is barely ahead of the inflation rate.
With bank transfers becoming instant and chip and pin debit cards making it even easier for consumers and businesses to access funds quickly and with a minimum of fuss this report suggests that a key change to the way people pay for goods and services.
Sandra Quinn, Director of Communications for the Payments Council, commented:
“Cheque usage is shrinking dramatically, while credit cards hold less appeal for consumers and businesses.
“We use cash less where there is an easy alternative, but we’re years away from cash falling out of fashion. Debit cards are taking over our daily purchases, while Faster Payments are fast becoming how we transfer our money electronically.”
In spite of this, Ms Quinn added that the overall payment figures suggest a “distinct lack of energy in the UK economy.” She went on to say that although economic recovery is underway, the total values of payments are not indicative of a strong growth.
A fragile economy has brought about changes to the way in which we view and handle our personal finances. With personal credit card and loan debt still rife throughout the UK many people are continuing to be frugal with their spending.
It appears that the Bank of England has come to realise that and all banks and building societies are now stocking their ATMs with £5 notes.
The current scarcity of £5 notes means that they change hands many more times than other notes before returning for sorting. This coupled with the increasing wear and tear, in contrast to other notes, makes them less suitable for use in ATMS.
Consequently the Bank of England is to ensure that higher quality £5 notes are going to be made available to banks and building societies for use in their ATMs, as part of it’s reforms to the cash note circulation system.
ATM operator, Link, has stated that the higher quality £5 note is a pre-requisite to stocking bank ATMs with five pound notes and also means that better quality notes will be entering public circulation.
A recent report by online travel agent, Sunshine.com, has revealed that British consumers are prepared to borrow from banks and credit card companies just so that they can afford to take a trip abroad.
The report shows that a whopping 50% of borrowers paid with a credit card, whilst over a quarter actually took out a bank loan to pay for a holiday.
Shockingly, 20% of people stated that they would rather face debt than go without a holiday abroad. Of the 1,891 people polled, 50% revealed that it would take 12 months or more to complete repayments, with 22% taking around 6 months to repay debts and a mere 7% were able to clear their debt in a month.
Chris Brown, Managing Director of Sunshine.co.uk, commented:
“Borrowing money has unfortunately become an increasing necessity for those wanting to enjoy a little luxury in this tough economic climate.
“The fact that many would rather experience debt than go without a holiday is surprising, but it just proves how important a little respite from the pressures of everyday life can be.”
Mr Brown also urged caution when considering borrowing money, whether credit cards, bank loans or even payday loans, to pay for a holiday.
Recent figures released by the Bank of England have revealed that credit card lending improved during July in the UK. Many economists believe that this indicates tentative signs in the recover of the country’s economy.
The Bank of England’s figures showed that credit card firms and banks have been more inclined to extend larger amounts of credit to consumers throughout July, with credit card lending increasing by £200 million. This is clearly a good sign for both the economy and consumers alike.
Some of the excellent offers coming out now from many credit card lenders are said to be far better than some pre-credit crunch, which many experts believe shows that banks and lenders are growing in confidence regarding debt repayments by customers.
Regardless of this many financial officials and industry groups are urging caution to credit card firms and banks in extending too much credit as they may be tempting consumers to get into even more debt as a result of some of these excellent credit cards on offer.