Cash Withdrawls In the UK
October 16, 2008
According to research done by U Switch, consumers using credit cards in the UK are making over 38 million cash withdrawls every year and they are doing this at nearly twice the average APR% which is about 17.2%, which equates to an average 32%.
The last three years has saw figures rise to a staggering 41% compared to 21% back in 2005. Back in 2005, Nationwide were the cheapest cash withdrawl provider with a rate of 16.9%, but those days are long gone and the Nationwide now join the other providers to date but upping the rate by 85% which today would see 31.2%. The Nationwide do have the best method for customers to repay this amount back by making sure that the cash withdrawls being the first thing that is paid off on the individuals account which. Other providers make their customers pay off the whole amount. Another example of this would be Lloyds TSB who in the last three years has gone from 19.9% to todays rate of 31.91%.
Personal Finance Manager at U Switch, Louise Bond, says “People who use a credit card to withdraw cash may already be struggling under the burden of debt and are forced to resort to this method of borrowing to make ends meet. They can ill afford to pay the exorbitant rates of interest that most lenders are now charging them. While we accept that credit card providers have to make money, and that cash withdrawals carry a higher risk of people getting into bad debt, it is indefensible for companies to penalise their most vulnerable customers.”
“With some providers now charging up to the APR equivalent of almost 32% on cash withdrawals, equivalent to some sub-prime credit card rates, cash rates have become sub-prime rates masquerading as mainstream lending. We now challenge the OFT to investigate whether these rates amount to ‘usury’ or extortionate lending.”
“While the DTI may have intended to simplify things for consumers when they came up with these changes, they have actually caused more confusion. The reality is that most people who use this facility are either unaware of the actual costs incurred, or are so desperate to get their hands on the cash that they don’t care how much it will cost them.”
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