Card sharp

By JO THORNHILL
Updated:

 

IF YOU hold an Egg or Barclaycard credit card it may be time to look elsewhere. Both are set to make borrowing more expensive.

Egg's six-month interest-free offer for new customers will end next month - and its interest rate will rise to 12.9% from 11.9%. For cash withdrawals the rate will rise from 14.2% to 15.2%.

Egg's moves are driven by its determination to start showing a profit by the end of the year. The Prudential-owned operation reported a £63.4m pre-tax loss in the first half. Egg chief executive Paul Gratton said he hoped that increased rates combined with customers moving out of special deals would push the group into the black.

Barclaycard has announced a string of new charges in place from 1 August. These include a £15 penalty for late payments and bounced cheques or direct debits, and a £3 charge for extra statements.

From 1 September there will be a minimum £2 charge for cash withdrawals and a minimum charge of 50p on those who do not clear their bills in full each month. Customers also face a £10 account servicing fee unless they spend at least £200 on their cards each year.

For good measure, Barclaycard is slashing the benefits available to customers - insurance cover on purchases will fall to 60 days from 100 and from next year there will be no accidental loss cover.

Barclaycard is to reduce its rates - but that's unlikely to soften the blow. At 18.9% - cut from 19.4% - Barclaycard's new rate is still significantly higher than many rival offerings.

Egg's annual percentage rate is still pretty competitive - but there are plenty of better deals on offer. Cahoot (8%), Intelligent Finance (9.9%), Northern Rock (10.5%), Halifax (10.8%), Hamilton Direct (11.9%) and Lloyds TSB Asset Advance Mastercard (11.9%) have lower interest rates.

• Check out the best credit card deals

The Government is proposing a major shake-up of the Consumer Credit Act, which covers all forms of personal finance, including credit cards and loans. Click here for a full report.

Penalty payments are the scourge of credit card borrowers, often striking unexpectedly. Alex Morgan, from Linlithgow near Edinburgh, pictured right with her husband Trevor, was surprised to be charged £18 when she cleared her £8,000 balance in one lump sum.

Mrs Morgan, 37, had racked up £8,000 on her MBNA card after moving house and getting married.

But when she decided to pay off the debt all at once, MBNA charged her £18 for the privilege, describing it as 'an abnormal payment'.

She complained to MBNA, saying it was discouraging customers from paying off their debts and forking out more interest instead. She says: 'I assumed they would be quite pleased I was paying off a big chunk with them, so I was a bit shocked when I saw they had charged me £18 to do so.' Mrs Morgan, an editor at Business AM, set up monthly direct debits to pay off her balance and then cancelled them before she made the one-off payment. She adds: 'They said that if you set up one sort of payment you have to stick to it, otherwise you will get charged.' MBNA gave back the £18 fee when she threatened to cancel her credit card.

A spokesman for MBNA says: 'This came about through the timing. The lump sum payment happened so close to the direct debit date, so it was too late to stop the direct debit request being made. 'The £18 charge is basically for a returned payment fee because the money was not available, but when the customer explained things we refunded the sum.'

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