BBC News – Saturday, 4 February 2006:
Barclaycard customers who pay their bills in full each month may have their payment date suddenly brought forward, the bank has told the BBC. The move could put customers at risk of incurring a £20 late payment fee if they do not examine their bills carefully each month.
Barclaycard denies it is trying to rake in late penalties, and says it never guarantees customers a fixed payment date each month.
Barclaycard’s Ian Barber said Barclaycard was “having to face up to the fact that clearly we are not making as much money out of customers that pay their bill in full as we are out of those that borrow”, he said. He added that the company was “quite open about it… if you pay your bill in full every month you may get a few days less to pay… That is the fact of it and we are not going to shy away from that.”
It’s hard for me to believe that credit card companies are not raking in the cash as it already is with high interest rates, merchant charges and existing fines.
When the mafia did it, it was called loan sharking. That same business model, albeit without the broken legs, adapted by government and sanctioned by laws is called “business”.
It’s funny and telling that in the credit card industry people who pay off their statements fully every months are known as “deadbeats”. Which goes to show you that the “enemy”, “terrorist”, or “deadbeat” is purely point of view.
Ye gods, I hate business people. This reminds me of when some financial guy (I forget what he called himself) was asked to speak to a college class I was taking, and he told us that leaving a balance every month would get you a better credit score then paying in full. That didn’t make any more sense to me than this does.
I think the name on the credit card says it all.
I guess the free 3% or whatever they skim from the merchants isn’t enough for them. One thing they teach in business school seems to be greed. And if the greed works, then you try more greed.
good retaliation? buy stock in barclay
The banks own our politicians and now they want to own us.These bastards have reworked the bankruptcy so all the deadbeats who file will never get out of debt.Almost 80% of people who file have had an accident or illness.It won’t be long and the U.S will have debtors prisons.A little known fact the last bill Clinton veto’ed was this law and his wife voted for it as a Senator.Yes she took lots of campaign contributions from N.Y. banks.
Well for what it’s worth…
Steve: The problem wasn’t that you had “bad” credit; the problem was you had NO credit history. It actually does make sense: creditors need to gauge risk, so they want to know how you can manage borrowing money. In your case, for all they know you just got out of prison, never had a chance to borrow money, and would go ape-sh*t once you finally got your hands on a credit card. That is their risk.
Baba: I’m pretty sure that “financial guy” was wrong. To maximize credit scores, you DO need current credit lines available, but you don’t need to be carrying a balance: you want the maximum ratio of credit available to credit used up, to show that you’re not scrambling to pay bills. I’m not 100% sure, that’s kind of a black art, but having zero balance and demonstrating that you do not need to desperately use up all your credit is not going to hurt your credit score in any meanigful degree.
As for Barclay’s, they want to maximize their profits. You want to minimize your costs. It’s a tango. UK has a free economy; people can go to the competition, and there are probably a multitude of lenders who don’t do the same thing. Or, a cardholder can just maintain a one-pound balance so as to avoid getting screwed, while forcing Barclays to go to the expense of maintaining the account and mailing out a bill every month. Of course ome company might screw you if they can get away with it — that’s why competition is good.
Dan: Yes. We will soon have debtors prisons. Of course we will. Put your tinfoil hat back on and go to sleep.
Dan, we already had a debtors prison…Georgia, the Australia of the Americas.
http://en.wikipedia.org/wiki/Province_of_Georgia
Steve,
He is correct, having no credit history is ALMOST as bad as having a bad credit history. If you have no history of debt repayment, the lenders have no basis for judging your ability to responsibly repay future debt.
There is also a problem with having too much available credit. If you have 5 credit cards with no balance, but have a potential to take take on, let’s say, $20,000 over night. Then you will be less attractive to a lender for things like car loans and the like, than somebody with a maximum potential credit line of $5,000.
Well, in honesty, that is one of the drawbacks to paying for everything with cash, it does nothing to further establish your credit. Obviously paying your rent, having a checking account, having a cell phone, etc. do.
When I bought my current car, I had to finance it because it was the first new car I’ve ever had. Well, even though I have a really high credit score, I had never had a car loan before and never had i borrowed more than $3500. This had the result of disquallifying me from getting the lower interest rate from the lender.
Nobody said it was at all fair, but that’s how things are. It’s their money to lend, so they can choose to whom and under what terms they lend the money.
I think my Wells Fargo card did this to me once or twice in the past, but with no harm. I always make a point to check the date, especially since this happened. I came close to calling them up and cancelling the card though.
The one thing most people will not do is negotiate the loan terms with the lender. I know, I’ve done it and got a lower rate. When I was negotiating my mortgage the lender tried to add ½ point to the rate. I asked the broker to take off 5/8 from the rate and I would sign. He said he couldn’t so I thanked him for his business and walked out of the office. I got a phone call at home that night telling me that the lender agreed to come down by ½ point. I told him I wanted 5/8 off. Either the broker or the lender had changed the terms and I didn’t like those terms. Because of the lost trust, they needed to make it up to me because I was talking to another lender the next afternoon. The next morning I got my 5/8 off the final quote.
If you don’t like the terms, tell them. Some times they might accommodate you, sometimes not. And don’t be afraid to try out another lender and don’t be afraid to tell the other lender what the first company offered. THEY WANT YOUR BUSINESS and they very well might undercut the competition.
Barclays are one of the biggest bunch of thieves in the UK. There is a massive freedom of choice in the UK banking market and consumers should use that freedom and move to a more friendly card. I know I have!
Steve, if you’ve lived ten years within your means, then why did you need the credit? The comapnies have no basis to judge your loan ability.
Pat, did you check the terms. They may have gotten pack that money with interest talked on from a middle of the month closing date or closing costs.
I don’t know about the UK but in the US I blame this on education. On thing sorely lacking in the US Education system before college is good financial education. How to save money, how to use credit cards and not over spend, how to save and buy a house, plan for retirement, and so on. Or like Pat talked about on how to negotiate loan terms for a car to home to credit card rates. Nope soon as you get to college you get bombarded with credit card offers so you can go into more debt on top of your student loans.
If my credit card company did this I would dump them. Also If I was a merchant I would inform my customers about what this company is doing when they paid with that company’s card.
Steve
I understand perfectly what you are saying. There does seem to be some hypocrisy involved. It doesn’t make any sense. You are right that the lenders will give someone in debt a better rate then someone who has financial responsibility. The worst are banks, and the bigger the bank, the worse the terms.
If you have dealt with the bank for some time, go there first. If they offer you something ridiculous then let them know that you will be looking for a new banker. After all, if this bank rewards its customer’s loyalty with predatory lending rates then you don’t need them. Go next door and before opening an account let them know why you want the loan and what terms they will give if you also do your banking through them. If they won’t do better, try another bank, or credit union. The thing is, shop around. Too many people go to one place and will accept whatever terms they offer.
The other recommendation I suggest is to get a Debit card from your bank. The few times I buy on line I use mine. We do have a credit card but almost never use it. Shoot, I don’t even know if we have a balance on it.
AB CD
Very good point. Yes. I already had their loan offer and that is where I first noticed the rate hike at 6 5/8 when I had been quoted 6 1/8 pct. When they gave the revised offer at 6 pct I double checked that this was the only change. It was about two months later that the FED raised the prime rate to about 4 ¼ pct. Being in close the same situation as Steve, not using credit, I didn’t expect to get the best deal. Also, if I had a bigger D/P I might have gotten a slightly better rate. I did the same thing with my car loan. I offered the car dealer the chance to do the best they could. When they were talking 8-9 pct I said thank you and told them my clunker would just have to last a little longer. They quickly came down to a reasonable rate.
The thing to remember is they want your business. Your loan with a 1.5 pct profit margin is better then a 3 pct profit margin on a loan they didn’t sell. They all want to make money and they can’t make any money if you take your business elsewhere.
Yes they do, for 18 years I paid all my bills on time.
1) How do the creditors know that? None of the businesses whose bills you paid in cash left a paper trail.
2) Even if you could show a paper trail, using credit is obviously different than just using cash. You can’t spend more cash than you have, and go bankrupt. Most people can handle the concept of borrowing money and paying it off a little bit every month. But some people can’t.
So the easiest way for the industry to guage if you can handle it is to extend a little credit to you and see how you handle it. Then they up your limit, or give you another card. Then you get a car with an installment loan. Then you get a house. Note if you have not done the credit cards and installment loan, it’s harder to get a mortgage (or it used to be).
You have to prove you can use credit responsibly, merely by using the credit they are falling all over themselves to give you. But you didn’t and thought “I’m so smart, avoiding those shysters and not falling into their debt trap.” Then you wanted a house. “Oh shit!”. Whoops.
Didn’t anyone tell you how the credit industry works, Steve?
Umm, don’t they have debit cards where you live? Don’t these work just like credit cards online(Visa check card)?
You usually don’t get as much fraud protection with a debit card vs. credit card.
My advice for those that can pay cash for everything: buy things on credit and put the equivalent cash into a high-yield savings or investment account. This does three things: reduces the aggregate rate of your loan, builds credit history, and leaves you emergency cash within reach. This is what I’ve done since University for cars etc.