05.18.2007 | 5:57 pm | Uncategorized
Profits of British credit card companies plummeted by 43 per cent last year when compared to the previous figures in 2005, it was revealed this month.
According to banking analyst Lafferty, profits for all collective UK credit card companies amounted to just £1.16 billion in 2006.
The fall in profits highlights just how much the industry relied on overcharging customers for fees such as going overdrawn or sending letters to customers, which were capped at £12 in spring 2006.
In the past year there has been much criticism of credit card companies over their attempts to introduce new ways of charging customers, which have been dubbed as cynical and unfair exercises by consumer groups.
The figures now put the UK credit market in the bottom third of global credit markets in terms of profit, with credit companies now only making an average of £16 per customer, compared with £27 per customer in 2005.
05.17.2007 | 5:40 pm | Uncategorized
Profits of the UK’s credit card companies have fallen by around 40 per cent over the past year, according to the latest statistics.
On average, lenders made an average of £24 per credit card issued last year, a decrease from the £27 annual profit per card recorded in 2005, making the UK the third-least profitable market for credit card companies.
In addition, the study carried out by the payments research firm Lafferty Group, overall profits in the UK credit card market fell by 43 per cent to £1.2 billion in 2006.
While profits are predicted to fall further over 2007, with total profits for the year of £1 billion expected, the market is likely to recover in 2008.
Part of the reason behind the falling profits is the recent ruling against excessive penalty fairs for late payments, which has benefited the borrower.
However, Lafferty also reported a rise in bad debts on credit card, with borrowers struggling to pay off the bills, highlighting the need for consumers to carefully consider the product they take out.
05.17.2007 | 5:39 pm | Uncategorized
UK consumers are increasingly living the high life, with credit card used to fund regular restaurant visits and the purchasing of luxury goods, it has been reported.
According to the most recent research carried out by Mintel, consumer spending rose to a record £1.09 trillion in 2006.
While home purchases continued to represent the biggest financial outlay by Britons, accounting for £4 in every £10 spent over the year, increasing amounts were also spent on luxury goods and lifestyle choices, such as holidays.
Of those questioned as part of the study, 23 per cent claimed that they were planning to take a major foreign break over the next year, while the amount spent on eating out grew by 18 per cent in comparison to 2002 levels.
“Rising disposable income has led to higher expectations about the quality of life, and as a result we are increasingly trading up and spending more on better quality, premium products and services,” said Neil Mason, senior retail analyst at Mintel.
Recent figures from the life assistance company CPP revealed that the average UK consumer will spend £157,530 on credit card over their lifetimes, with plastic being increasingly used to fund smaller, everyday purchases.
05.16.2007 | 5:47 pm | credit cards
Fashion chain Laura Ashley has been named as one of several high street culprits that have sent credit card to consumers who have not asked for them.
Stores which present credit card to those who have not requested one are acting within the law but have been accused of fuelling the UK’s current debt crisis.
GE Capital, who are responsible for managing around half the store cards in the UK, has already been branded as unethical due to its responsibility for high-interest store cards.
Often - as well as being easier to obtain than a credit card - a store card will charge a fee around ten per cent higher than most credit card, leaving borrowers to repay funds at a staggering 30 per cent interest.
There have also been problems in the past when high street stores were accused by the Competition Commission of failing to display the APR or other crucial details on the store card application.
The criticism comes just a week after it was reported that the common nature of debt in Britain means that many consumers are unfazed even by five-figure sums of personal debt.
05.15.2007 | 4:58 pm | Uncategorized, credit cards
Following a relatively quiet new year, UK consumers are increasingly spending on their credit card, according to the latest figures.
The trend comes as Britons have finally managed to pay off the debts from Christmas and began to feel more confident about spending again. One factor cited for the improved popularity of credit card is the recent ruling from the Office of Fair Trading concerning the penalty fees lenders are legally allowed to levy.
Following an investigation into the level of penalty fees, the OFT ruled that credit card companies could charge just £12 per occasion a borrower exceeds the limit on their card.However, lenders have begun to hit back in order to recoup lost profits. While some credit card companies have increased their interest rates or the charges for transactions carried out abroad, the Royal Bank of Scotland is currently considering charging its customers £12 should they fail to inform the bank about a change of address.
“I’ve never come across this kind of charge before,” commented Richard Mason, a spokesman for the price comparison site Moneysupermarket.
05.14.2007 | 7:12 pm | credit cards
Store cards have come under criticism from online financial advice company MoneyFacts.co.uk, for their continued “unethical” policies.
The cards were put under pressure last year by the Competition Commission, in an attempt to reduce the number of consumers with monstrous rates of debt.
debt has been easy to obtain on such cards due to the attractive offers such as money off their purchases, which are put forward to shoppers as they reach the checkout.
The Competition Commission last year ordered that all store cards should come with warnings against only repaying the minimum monthly allowance, should contain information on penalty fees, and have the APR visible if it is 25 per cent or above.
One financial expert from Moneyfacts warned consumer against such cards in no uncertain terms: “The Competition Commission must take further action to protect consumers from these exorbitant rates.
“Don’t get lulled into signing for a card unless you are going to make a substantial discount on your initial purchase and repay your balance in full.”
05.14.2007 | 7:12 pm | credit cards
A cash-free society looks that bit nearer as leading banks announce the next generation of credit and debit cards.
Following on from the Chip and Pin revolution, the ‘Tap and Go’ initiative will allow consumers to make minor purchase, namely transactions of £10 or under, without needing to enter a Pin number or swipe their cards.
Using the latest technology, the amount will then be charged to the customer’s credit or debit card.
Banks already signed up to the new cards include the Bank of Scotland, hsbc, Lloyds and the Halifax, with London’s financial districts set to be the location of the scheme’s first trial in September.
Given the limit on transactions allowed by the cards, industry experts are confident that the ease of the Tap and Go initiative will not be exploited by fraudsters.
“In the United States where they have this technology already they’ve found they just don’t get targeted,” commented a spokeswoman for the UK Payments Association (APACS).
In addition, as a security measure, customers will occasionally be asked for their PIN, regardless of the size of the transaction.
