Warning over High Cost of Credit Card Cheques; Providers Rake in Pounds 571m as Consumers Battle to Stay Afloat DEBT PERSONAL FINANCE
Byline: JOHN CRANAGE Personal Finance Editor
There were renewed calls this week for a ban on unsolicited credit card cheque mailings as personal unsecured debt levels mount.
Card providers have raked in more than pounds 571 million in the past year as desperate consumers and homeowners resort to high interest card cheques to try to balance their budgets, according to the finance website uSwitch.
It said research had shown that hundreds of thousands of consumers were using the cheques to top up their bank accounts and pay their utility bills.
The average APR applied to credit card cheques is 26.71 per cent, near ten basis points higher than the average charged on cards.
uSwitch.com's credit card cheque investigation revealed that more than 14.1 million UK consumers have been sent more than 280 million credit card cheques in the past year, 97 per cent of which were unsolicited.
More than three million have been used by consumers who between them spent pounds 3.6 billion and racked up a pounds 571 million bonus in handling fees and interest for the card companies.
They are being used to pay gas, electricity and water bills, consolidate debts and transfer cash into bank current accounts.
In the past year alone, the value of the average credit card cheque has risen from pounds 976 to pounds 1,141.
Analysis shows that the average handling fee charged by providers is 2.5 per cent, which equates topounds 28.49per cheque.
Assuming that the consumer pays off this amount over a year, the interest charged to use this cheque, at an average APR of 26. …