Thursday
May 17th
| "Credit cards? Too expensive - I'd never borrow on one" |
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| Written by Peter James | |
| Wednesday, 15 November 2006 | |
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An amazing admission from the Canadian chief executive of Barclays Bank
in Great Britain may have ramifications for Canadian credit card
companies and their customers in Canada.
Matt Barrett, who earns £1.7 millions running England's most successful credit card company, confesses he does not use his own Barclaycard to borrow money because it is "too expensive."He also advises his four children "not to pile up debt on credit cards" because of the high costs. Barrett's confession came during a tough session with British MPs on the Treasury Select Committee, which is investigating the high level of credit card charges. Asked how he could justify the 17.9 per cent interest rate charged on the cards, Barrett said: "I don't borrow on credit cards because it is too expensive." During the committee session MPs accused five British bank chief executives of tricking the public with a range of "baits" which lured them into "a position of chronic borrowing." The MPs said credit card firms levied "excessive" interest rates and confused customers with baffling terms and conditions and "disingenuous" zero percent offers. One member of the committee, said Barrett was guilty of "barefaced cynicism" in marketing a "zero per cent forever" deal that actually had expensive strings attached. Four of the biggest banks - Barclays, Lloyds TSB, Royal Bank of Scotland and HBOS (Halifax Bank of Scotland), were represented by their chief executive officers. The heavyweight line-up from Britain's booming credit card industry was completed by General Charles Krulak, chief executive of the US credit card provider, MBNA. The five providers between them make at least £1 billion profit from their credit card products. The committee was particularly critical of zero per cent offers that appear initially to be attractive but trapped people into accumulating increased levels of debt. One Member of Parliament said people were being "actively misled" because borrowers who took up 0 per cent offers had to pay off balance transfers first while at the same time racking up interest on more expensive debt. Over the past four years the level of credit card borrowing has doubled in Great Britain - a trend echoed in Canada as consumers are adding to their personal debt-load at record levels. This has led to fears that millions of Canadians will find themselves hopelessly over-stretched when interest rates start to rise. Barclays chief Matt Barrett, an Irish-born Canadian, was appointed in 1999 but was soon in hot water when he announced the closure of more than 170 bank branches to save money. Five Tactics Employed by Banks• Confusion over terms: interest-free periods vary hugely but details are rarely clearly spelled out.• Charging of interest: some cards charge interest on items three or four days before they pay the money to the retailer.
• Balance transfer ploy: customers are enticed by zero interest on
balance transfers but are hit with sky-high rates on new transactions.
• Partial repayment scam: repaying only part of the balance sometimes
gains nothing. Interest is still charged on the entire debt. • Surprise fees: levied on cardholders who breach borrowing limits or are late with minimum payments.
As consumer debt skyrockets in Canada more attention is being paid to
legislation and other solutions being created in developed countries
to bring this worldwide trend under control. In the meantime, read over
the fine print carefully before signing up with any new Canadian credit
card. It pays off to be careful.
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