Good riddance to credit card cheques

Andrew Hagger of Moneynet.co.uk comments on the announcement that the Government proposes to stop customers being mailed with unsolicited credit card cheques.

The creation of a Consumer Advocate and the banning of credit card cheques is a welcome move, although it is disappointing that it has taken so long for this action to be taken.

Credit card cheques have wreaked havoc with the finances of unsuspecting credit card customers for years.

One of the big problems has been that people who are 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, even if just for a couple of months.

Alternatively they may have used these cheques to make the minimum payment on another card as they continue to juggle an ever increasing pile of debt. The reality is that if they approached their card provider on a regular basis with a request to pay money off another credit card; there is a strong likelihood that the answer would be a big fat NO.

Perhaps a bigger plus point for someone struggling with money is that it saves having to admit to their problems or speak to anyone about it, and because of that, they are prepared to put up with the high costs associated with this type of borrowing.

Unfortunately they are merely delaying the inevitable and eventually run out of credit, and are then faced with a far larger pile of debt.

So whilst a credit card cheque may offer a short term fix, it comes at a hefty price. A £500 cheque can easily spiral by an additional £150 in fees (3%) and interest (28% APR) in just 12 months.

Sending these cheques to people with little financial discipline or will power is akin to posting candy through a school letterbox.

Another issue with credit card cheques has been that you don't know when they are being sent, so if they're intercepted in the post, the first you may know about it is when you receive your next credit card statement. Whilst the credit card company is liable for such losses, there is still the hassle and inconvenience to deal with.

So whilst these cheques are only part of a much larger indebtedness problem in the UK, we need to tackle the individual components, no matter how small, if we are to make a difference.