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Banking giant to scrap credit card cheques
Published in Saudi Press Agency on 01 - 09 - 2006


A UK banking giant is set to
scrap expensive credit card cheques, leading to calls for other
lenders to follow suit, Reuters reported.
The Royal Bank of Scotland (RBS), Europe's second largest
bank and the world's fifth biggest, will withdraw credit card
cheques at the end of September.
It is the first to do so since the Department of Trade and
Industry opened a consultation on measures to improve the
transparency of credit card cheques in November last year. It is
due to announce the findings of its enquiry shortly.
Nick White, head of personal finance at price comparison
service uSwitch.com, said the RBS move was "certainly a step in
the right direction and one which we hope other providers will
follow.
"It's good news to see that one of the largest credit card
providers in the country is leading the way by ending this
practice for both new and existing customers," he said.
In January, RBS and its NatWest subsidiary stopped sending
out the cheques unsolicited.
White said the bank's decision to stop issuing them
altogether was "tantamount to an admission that it's only
commercially viable for the banks to do so if they can send them
out unsolicited -- encouraging customers to use them who
otherwise would not."
Credit card cheques have long been regarded as one of the
key contributors to a rise in bad debt, which has been
increasingly eating into banks' profits.
RBS' bad debt charge in its retail markets unit rose 19
percent to 680 million pounds in the six months to end-June,
continuing a trend among banks showing consumers are struggling
to pay back unsecured loans.
Credit card companies send out thousands of unsolicited
credit card cheques every year.
They allow consumers to draw money from an existing credit
card account, and can be useful to buy goods or services from
organisations that do not accept credit cards, or pay cash into
a bank account.
But the cheques come with a host of hidden charges and
higher interest rates than those normally levied on credit card
transactions.
Some lenders charge an annual percentage rate of more than
20 percent on purchases made using credit card cheques,
according to data from price comparison service
Moneysupermarket.com.
Users often find there is no interest-free period, compared
to a typical 56 days on credit card spending, and can also be
hit with an additional "handling" fee.
The news came a day after APACS, the UK payments
association, launched a new credit card cheque summary box.
The information box, which will accompany all credit card
cheques sent out in the UK by the end of the year, aims to spell
out the terms and conditions, such as interest rate and other
charges, at a glance.


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