Credit card customers still not happy

Following the credit card industry’s barrage of money making schemes in response to the OFT’s clampdown on penalty charges, the UK’s largest independent credit card report from uSwitch.com reveals that nearly seven million credit card customers (21%) are not happy with their existing provider.

Nationwide has once again been voted top of the pops with the highest level of overall customer satisfaction (94%). Top of the flops is Capital One with 32% of customers dissatisfied.

Almost one year on since the OFT effectively capped credit card charges at £12, uSwitch.com’s annual credit card report reveals that one in five customers are still not happy with their provider. Despite this, the report has found that consumers are not taking action as they typically stick with the same provider for a staggering six years. Moreover, providers such as Lloyds TSB, which displayed low levels of customer service with one in three unhappy customers, has had 40% of its customers for more than 10 years. Similarly, Barclaycard and NatWest have had 50 per cent of their customers for more than a decade.

Mike Naylor, Personal Financial Expert at independent price comparison and switching service uSwitch.com, said: “Credit card companies are relying on customer lethargy, and, with over half of consumers never comparing their existing deal with the rest of the market, clearly people are playing directly into their hands. Providers have spent the last year constantly introducing ‘get rich quick schemes’ for their own benefit yet customers are still prepared to stick with them for years. Year on year the number of people falling into this trap grows as more are lured in by their existing bank or building society’s cross selling tactics. This is allowing credit card providers to treat their customers like money-making cash cows and to completely disregard customer satisfaction and value for money.”

The consumers’ vote – 2007’s best and worst credit cards

Overall, Capital One, with a 6% market share, was voted the worst credit card provider in the report. One third of their 1.9 million customer base are not happy with several areas of service from the application process to the value for money that it offers. Not far behind Capital One sit Barclaycard, Lloyds TSB, HSBC, HBOS and Royal Bank of Scotland/NatWest – all of which have close to a third of customers feeling dissatisfied with their provider. Despite some of the high street banks being among the worst ‘performers’, they still dominate the credit card market with a 66.5% collective share, totalling 21 million customers and £19.92 billion of card debt.

For a second year in a row, Nationwide has won the top spot with the highest number of satisfied customers (94%) in the uSwitch.com annual credit card report. American Express also faired very well (93%), and was the card most people would recommend to a friend. Morgan Stanley came top in four categories, including customer support, application process, value for money and payment services.

Mike Naylor continues: “The majority of credit card providers have made moves to recoup the estimated £300 million lost when the OFT effectively capped credit card penalty fees at £12 last year. Most notably, Capital One launched an 18 month 0 per cent balance transfer deal last year, which required customers to make £100 of new purchases in the first three months to qualify for the 0 per cent deal. This is a sneaky way to force customers to incur interest on purchases for the entire balance transfer term as a result of the order of repayments.

“It’s no great surprise to see Nationwide take the number one spot for the second year running given their unusually preferential order of repayments and the lack of exchange rate loading fees on its credit card overseas.”

Why did consumers choose their existing provider?

Our survey also revealed that an existing relationship with a bank or building society is the main reason that almost one third (31%) of credit card customers chose their existing provider. This could indicate that cross-selling tactics are an easy way for the big banks to lure customers into less competitive deals and keep them there. Also, one in five people (22%) chose their card because of a reward scheme and, surprisingly, just 16% to take advantage of an introductory rate or offer.

What do people want from card providers?

Accuracy of statements (45%) and easy to understand statements (37%) were the most important aspects of service that people wanted from their credit card provider. This is not surprising given the complexity of charges and interest rates faced by credit card customers. The ability to check balances and make payments online were also important to 39% of people. One in four cardholders cited interest rates and charges as the most important feature. This was also the area that card providers scored most badly on across the board.

What would make people switch?

One in six people in our survey said they are likely to switch card credit card provider in the next six months. However, the vast majority of people (76%) are missing out on big savings as they said they are not planning to switch in the next six months. The most popular reason for moving provider (53%) is to take advantage of a balance transfer offer followed by taking advantage of an introductory rate (44%). One in four people would switch for lower charges.

Mike Naylor concludes: “The overall number of dissatisfied customers has increased by just 1% since 2006. Over the next 12 months, we really want to see consumers sit up and take action. As it stands people are not stimulating competition amongst providers whilst wasting a great deal of money on cards that are expensive by comparison. For example, consumers could save £2209 in interest on a 13 0% balance transfer deal so it’s definitely worth doing. These deals are available from Natwest, RBS and Mint but in order to get maximum financial benefit they should not be used for new purchases.

“If consumers do not take a stand and switch away from the providers that are offering inadequate levels of customer service, these organisations will gleefully continue to enjoy this extremely profitable lethargy. Switching credit card providers is an extremely quick and easy process and not something that consumers should shy away from.”