MBNA to drop credit card cheques
Credit card giant MBNA has announced plans to stop issuing controversial credit card cheques.The group said it would not be issuing any new cheques to its customers from March 31.
Lenders will be banned from sending out unsolicited credit card cheques when the Financial Services Bill comes into force later this year, but they will still be able to issue them to customers who request them.
MBNA, which is currently the biggest issuer of credit card cheques in the UK, said it was making the move in response to customer feedback.
The cheques have been heavily criticised by consumer groups as the interest charged on them is often far higher than for purchases made using the credit card, typically at 28%, although providers do sometimes issue cheques at promotional rates of 0%.
Unlike credit card purchases, where there is an interest-free period, people also have to start paying interest on money spent using the cheques straightaway, while they often have high fees and charges of 3%.
Concerns have also been expressed that over-indebted borrowers may use them to make repayments on other credit cards, getting themselves deeper into debt.
It is also thought that sending out the cheques unsolicited leaves people vulnerable to fraud, as they do not know the cheques have been sent, and if they are intercepted, the first they know is when they receive their credit card statement.
Andrew Hagger, of Moneynet.co.uk, said: "The announcement today from MBNA that it will stop issuing credit card cheques from the end of this month is most welcome and should be followed by the rest of the industry.
"One of the big problems has been that people who have been under financial pressure have seen a credit card cheque as an easy way of boosting their bank balance and to buy themselves some breathing space."
Unlike credit card purchases, where there is an interest-free period, people also have to start paying interest on money spent using the cheques straightaway, while they often have high fees and charges of 3%.
Concerns have also been expressed that over-indebted borrowers may use them to make repayments on other credit cards, getting themselves deeper into debt.
It is also thought that sending out the cheques unsolicited leaves people vulnerable to fraud, as they do not know the cheques have been sent, and if they are intercepted, the first they know is when they receive their credit card statement.
Andrew Hagger, of Moneynet.co.uk, said: "The announcement today from MBNA that it will stop issuing credit card cheques from the end of this month is most welcome and should be followed by the rest of the industry.
"One of the big problems has been that people who have been under financial pressure have seen a credit card cheque as an easy way of boosting their bank balance and to buy themselves some breathing space."
© 2012 Press Association