Competition in the credit card market hotted up further this week with newcomer Thomas Cook cutting its rate for balance transfers to one of the lowest on the market, and American Express adding benefits to its green charge card.
Travel agent Thomas Cook has signed up more than 10,000 customers since launching its own-brand card in April, and hopes to recruit many more by reducing its introductory annual percentage rate (APR) on balance transfers from 3.9 to 2.9, shaving its rate for purchases from 16.9 to 15.9, and adding a cashback facility for people who use the card to buy their holiday at Thomas Cook.
The special offer balance transfer rate lasts for six months - after that it reverts to 15.9 APR. The cashback scheme will give those who book their holiday at the travel agent money back at the rate of 0.5% for up to £2,000 spent and 1% back for £2,000-plus, though this is taken straight off their credit card bill. The card already has a loyalty scheme where customers earn between 0.5% and 2% back in the form of Thomas Cook "travel pounds," which can be redeemed against travel purchases made in its branches.
This week also saw American Express sign a deal with online retailer Lastminute.com to offer "exclusive" late deals and special offers to its army of green charge card holders. The link-up is part of a multi-million pound revamp of the card. The deals and offers will range from "experiences", such as learning to race a power boat or taking a tiger moth flight, to book ing holidays and concert tickets. Card-holders can find out more by logging on to the new Amex website:
www.americanexpress.co.uk/green
The two announcements came hot on the heels of the launch of a new credit card from Capital One with an APR for purchases of zero for the first six months. After that it reverts to 12.9 APR. And for cardholders transferring balances in the first six months, Capital One is offering a lifetime rate of 7.9 APR on the amount transferred.
However, research from the company illustrates the challenge it and other newcomers face in persuading the public to ditch their less competitive plastic and sign up for their cards. Its survey found that only one in 10 of us are happy with our current card - but 58% of people would still think twice about changing to a card with a lower rate. When asked why, the most common reason given was that they "couldn't be bothered," says Capital One, which has calculated that inertia is costing UK cardholders billions of pounds.
Capital One's offer was slightly overshadowed by a row over the way it, and many other companies, calculate interest. It's common practice in the UK that if an individual has chunks of debt on their card coming from both balance transfers and purchases, what tends to happen is that the interest accumulated on purchases gets paid off after the interest on balance transfers. This effectively means that the more expensive debt is paid last and the cheaper debt is paid first, which clearly isn't beneficial to consumers. Capital One says it is not alone in operating such a system and adds that it has started a review of its charging regime which could result in changes being made.
This week also saw Abbey National's internet bank, Cahoot, rated number one in a survey of internet credit cards. Gomez, a company which rates online offerings, said that out of the nine internet credit card issuers it looked at, Cahoot topped its league table, followed by Egg and Smile, the Co-op Bank's online bank. A spokesman for Gomez says its league tables "will ensure that consumers make informed decisions before signing up with an internet credit card service". For more details log on to www.uk.gomez.com
Cahoot (www.cahoot.co.uk) is unusual in that the interest rate you pay as a customer will depend, in part, on your credit rating and your agreed credit limit.
