Should UK Credit Cards Have Debt Warning Labels?

Comments attributed in the press to Jim Spowart, founder of both Standard Life Bank and Intelligent Finance, say that Mr. Spowart has informed the Chancellor of the Exchequer that he believes UK credit cards with Annual Percentage Rates (APR) in excess of 10% over the Bank of England’s base interest rate should carry warning labels on the problems associated with high repayment costs.

Given the record number of Brits applying for personal bankruptcy this year, the huge sums of UK bad credit debt being written off by all UK credit card issuers during the course of the year, and the sheer size of the number of Brits who are struggling to even make the minimum repayments on their credit card each month, many will no doubt feel that Mr. Spowart’s comments to Gordon Brown are well founded.

Not unsurprisingly, however, UK credit card issuers have come out saying that having a warning sign on the dangers of having credit card debt is not a good idea. The reason being cited, however, by UK credit card issuers that there is no direct correlation between the Bank of England’s base interest rate and the rate of interest being charged by UK credit card issuers seems weak.

Although it is true that UK credit card issuers do not increase their APR every time the Bank of England increases base rate in the same way as UK home mortgage loans can, when a lender is charging such a high margin over base rate they can often afford this luxury. Comments made by Mr. Spowart on his price comparison site Peopleschampion.com that “credit cards are an essential part of our everyday lives but some of the current rates are usury and there is no justification for this other than pure greed,” certainly seem to confirm this.

Nonetheless, the debate on whether or not UK credit card should carry a financial health warning will certainly rage on for the foreseeable future, so if you want to keep tabs on who the worst offenders are when it comes to charging interest on outstanding UK credit card debt, check out Peopleschampion.com’s new campaign which looks at both this and the issue of whether or not the UK needs to introduce legislation that insists UK credit card issuers highlight the fact that the cost of borrowing on a UK credit card far exceeds the current Bank of England base interest rate.

Richard Smith
12th October 2006

More Information:

• Causes and Cures Of Credit Card Debt
  For some, credit cards can prove a temptation too far, and soon they find themselves in debt. Simple precautions will keep the savvy card holder from such dangers.
• Tips On How British Women Can Climb Out Of Their Growing Credit Card Debt
  More women in the UK are spending money on credit cards than at any other time. In percentage terms, there are now more British women spending more each month than they earn.
• FSA Debt Test
• Debt information from the UK government
• Bank of England base interest rate
  

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