Credit card cheques

If you haven't put credit card cheques on your wish-list that won't stop your card issuer sending them to you anyway. They look like smaller versions of traditional bank account cheques but they couldn't operate more differently. It's a big mistake is to even think of them as an extension of your credit card. Although you can use them to pay for goods and services with the cost being charged to your card account, they carry a host of horrible extras.

Let's start with the interest. It is likely to be considerably higher than the rate you pay for credit card purchases. It will be closer to the rip-off rate you pay for cash withdrawals. Expect to shell out more than 20% interest on the value of the cheque. In some cases these rates are already as high as 25.6%. The interest-free zone you get with card purchases does not apply to cheques. So instead of a period of grace running for up to 59 days from the day you buy something, you get, well, nothing. The interest starts clocking up before the ink is even dry on your signature.

At this stage, your card issuer is clearly laughing at you. In fact they're laughing all the way to a fat profit as they slap a 'handling charge' on your spent cheque. This may be between one and 2.5% of the cheque's value. Use them abroad and costs will be added for currency conversion.

As if all that wasn't bad enough, the protection you get automatically with card purchases over £100 does not apply to purchases made with credit card cheques. This is because they do not have the necessary relationship between supplier and card issuer which a normal credit card transaction does.

Incredibly, card companies are happy to send books of credit cheques in the post to us unsolicited so that if they go astray, they are perfect for thieves and fraudsters. Consumer champion Which? last week criticised the government for not banning unsolicited credit card cheques, despite ministers admitting people may not understand the cost of using them.

The Department of Trade and Industry has launched a consultation on how to help people understand the different terms and conditions of the cheques as part of its overhaul of the UK's 30-year-old consumer credit laws. It may decide that information on interest rates and charges must be sent out with the cheques, or even written on the cheques. But this is not nearly tough enough and comes as a huge disappointment to Which? and others. 'Providing more information about how unsolicited credit card cheques work is not the answer,' says Emma Bandey of Which? 'These should be banned altogether'.

There is even disgust from financial companies: 'We are strongly of the view that the industry should clamp down on the unsolicited issue of cheques and the high rates of interest and other charges levied on them,' says Graham Hollebon, Head of Personal Finance at More Th>n. The firm's recent research shows that a third of us have received unsolicited credit card cheques.

'Consumers have never had it so good with 0% deals for both balance transfers and purchases, yet it seems many are being drawn in to borrowing money in a very expensive way - not to use for emergencies, but for everyday spending, or to 'treat themselves,' says Stuart Glendinning of price comparison website money 'My view is that if you receive unsolicited cheques from a credit card company you should avoid using them and destroy them immediately,' he says.

Much has been said about whether the responsibility for sensible borrowing rests more with the finance companies - which offer a seemingly endless stream of credit - or with the customers, many of whom lack self-discipline. It's true that we have a mountain of personal debt in the UK and some people just cannot seem to stop spending beyond their means. But credit card cheques represent the very worst excesses of a greedy and exploitative element of the finance industry.

It is well worth a letter or phone call to your card issuer to tell them you never wish to receive credit cheques. This avoids the risk of theft and may also help them get the message. If it's too late and you have been sent some already then shred them or rip them up before you bin them.

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