Britons Still Being Caught Out By Charges

Many UK consumers are still using credit card cheques without fully understanding the charges incurred by using them.

A new study by uSwitch.com has revealed that as many as a third of Britons that use credit card cheques are oblivious to the fact that they are charged a fee each time the use one. The study also revealed that three in five have no idea how much interest they are paying.

A consumer who uses one of these cheques to pay for a purchase can expect to pay on average a staggering £45 each time they write a cheque.

“ Self-regulation clearly isn’t working when it comes to protecting consumers from the additional charges they can incur unwittingly by using a credit card cheque,” said Nick White, head of personal finance at uSwitch.

“ There is a danger that many of the people who these cheques are targeted at will already be at risk of falling into over-indebtedness, and the 'convenience' of these cheques, coupled with the manner in which they are marketed by the credit card companies who issue them, could push them over the edge.”

Credit card cheques offer consumers various conveniences but at a price. They allow consumers to buy goods from suppliers who do not accept credit cards, whilst also allowing a cardholder to more conveniently make a payment to an individual, and to post-date a payment.

However, those conveniences can hit consumers in the pocket, as the charges and interest attached to credit card cheques are considerable in comparison to other forms of personal credit. They typically come with a two per cent charge and interest rates of 20 per cent or more. Issuers rake in further profit as interest on the cheque is charged from the moment the cheque is cashed, negating the initial interest-rate free period normally available.

“ You have to ask the question whether there is a case for the existence of credit card cheques in the first place,” said Mr White.

“ The credit card companies will say 'yes', on the basis that they are 'convenient' in 'emergency' situations, such as paying an emergency plumber.

“ However, the problem is that credit card cheques are all too 'convenient' in everyday situations for many of the cardholders who receive them, as our research shows.”

Alisdair Milton
12th July 2006

More UK Credit Card News
Try our feed