Credit where cuts are due

Banks and building societies have been quick to proclaim how they have passed on the benefits of the latest base rate cut to mortgage borrowers. But the same cannot be said of personal loans and credit cards.

HSBC, which charges its 3.5 million credit card customers a standard APR of 18.9 per cent, says it is 'reviewing the rates, but there are no plans to change them at the moment'. Likewise, its personal loan customers can expect to carry on paying between 19.8 per cent APR for loans under £2,000 and 9.99 per cent for loans over £12,000 for the foreseeable future.

Barclaycard, the market leader with 25 per cent of the UK credit card market, is 'constantly reviewing its rate'. Unfortunately for its 7.8 million customers, a review does not automatically mean a cut. They will continue to pay the standard 19.4 per cent APR for now.

In fact, a ring-round of the major credit card lenders - NatWest, Royal Bank of Scotland, MBNA, Alliance & Leicester, Bank of Scotland, Halifax - produced no sniff of an interest rate cut.

Richard Beck, a spokesman for HSBC, says: 'Credit cards have never been base rate-linked. It's flexible borrowing, and our pricing is risk- based. We have to build in the fact that there is no security against this type of lending.'

Beck even suggests that credit card holders should be grateful that rates haven't gone up. He points to figures collated by the Association of Payment Clearing Services (APACS), which indicate that credit card losses incurred through fraud have increased from £190m in 1999 to about £300m in 2000. But Richard Tyson-Davies, spokesman for APACS, says: 'The amounts look frightening, but in terms of the credit card companies' turnover, it represents about 0.15 per cent. There should be no discernible passing on of costs to customers.'

Intelligent Finance, the new Halifax telephone and internet banking subsidiary, has cut rates, reducing its flat rate for personal loans from 10.5 per cent APR to 10 per cent last week, and its credit card rate from 10.8 per cent APR to 9.9 per cent APR in January. But spokeswoman Jennifer Blackwood says the rate changes were not in anticipation of the base rate change, but a reaction to market changes since IF launched last July.

The Government recently published proposals for a 'Catmarking' system for credit cards - voluntary minimum standards which would enable customers to see at a glance what kind of deal an approved card offers. One proposal is that cards carrying the Catmark should clearly state their annual interest rate and their margin over bank base rates. But even this seems unlikely to make credit cards move their rates in line with the Bank of England.

Nick Cobbam, a spokesman for Halifax Card Services, says: 'Our rates are driven by the market, by competition. The market is very, very competitive right now. If our interest rates had been linked to the base rate, customers would be paying a lot more than they are now.'

As card users can't rely on the providers to pass on base rate cuts, they will have to shop around for the best interest rate deals themselves.

According to MoneyFacts magazine, Egg is still the best deal for anyone who already has credit to pay off, or wants to shop until they drop without repaying in full each month. Anyone who applies in the next three days will be charged 0 per cent for six months. Likewise, anyone transferring a balance before the end of March will get six months' credit free of interest. After the first six months, the rate will rise to Egg's standard variable rate, currently 11.9 per cent APR.

If you fail to squeeze in before Egg's deadline, consider RBS Advanta (0800 077770), which is charging 1.9 per cent APR for purchases and transfer balances until 1 January 2002.

Credit cards normally charge a higher interest rate for holders withdrawing cash, but Thomas Cook (0800 062620) charges 4.5 per cent, rising to 17.7 per cent APR after the first six months from the date of issue, making it useful for anyone planning a holiday this summer. Purchases are charged at the standard interest rate of 15.9 per cent APR.

However, in all these cases, you should be prepared to switch cards as soon as the special rate period expires.