UK credit cards
UK credit cards are no different from those in most other leading
economies. Money, especially in these days of electronic banking, is
international, and so are the rules and the systems governing it. The
big names in the credit card industry – Visa, MasterCard and American
Express – are virtually everywhere, including the UK.
With basic interest rates among international trading partners virtually in lockstep, interest rates in the UK are not much different from those in North America, with some notable exceptions. Many UK credit cards have 0% balance transfers, too.
There are cards for those with poor credit, others that provide rewards or cash back, and the virtual credit card that prevents online fraud was developed in Ireland.
Virgin, Egg and Marbles are leading UK credit card providers whose names are not familiar to most people in North America. Virgin, however, is issued by MBNA, a familiar name in the U.S.
Having said that, there are some significant differences with respect to UK credit cards in comparison with those in North America or in neighboring France. In fact, there are significant and confusing differences within the UK itself. There are 12 different ways in which credit card providers in the UK start to apply interest to credit card balances. Some cards, such as Lloyds TSB Advance charge interest on all transactions from the day they are debited, even if you pay your credit card bill by the due date.
Look for cards that start to charge interest at the latest possible date. Look, also, at the number of interest free days a card offers. Alliance & Leicester online credit card, Bank of Scotland Visa and Barclaycard offer 59 interest-free days, more than twice as long as cards in North America. Smile is just 46 days.
There are credit bureaus in the UK, as there are in North America, much to the envy of the French credit card industry where such agencies do not exist. That tends to lead to higher APRs in France. But the British are not entirely satisfied with the level of credit information available. The leader of one non-profit consumer advocacy agency said: "We feel that there should be more sharing of both positive and negative information, which would prevent indebtedness because it would make credit companies lend responsibly."
A number of suicides in the UK have been attributed in part to credit card debt. This has led to calls for companies to share total loan balance information with each other.
High rates a crime in France
But while the French don't have credit bureaus, they do have laws against usury, something lacking in the U.S. and UK. In fact, a card issued by one UK institution had an APR of 64.9% in 2005. Not for those who carry balances on their cards, obviously. The Bank of England base rate was just 4.75 percent at the time. Such a rate is a crime in France, where the upper limit was then about 20%.
British privacy laws make targeting potential customers more difficult for UK credit card issuers than they do for those in the U.S. This can result in some amusing stories for the media. One well-known bank in 2003 offered a small dog a gold card with a credit limit of $18,540. Another bank, the following year, signed up a homeless man and gave him a credit limit of about $500.
The question in the UK is how to provide the lenders with enough information so that they can offer the cheapest loans to consumers who are the lowest risk without providing too much information that could be used by unscrupulous marketers.
But isn't that the story everywhere?