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Card Cheques and Auto Limit Increases

Interesting development on the credit card front.  Once more, the Government is trying to make out that the financial services industry is at fault for pushing credit on people.

Whilst I subscribe to the view that there needs to be shackles on mortgage salary multipliers and LTV ratios (because that is heavily price-inflationary), I am less certain that these measures are required in the credit card space.

Take cheques.  There is always the shredder, or a good pair of scissors.  People don't have to use them.  There is also the option of telling your issuer not to send you any.

Likewise the auto limit increase.  You can always opt out of the process, and of course you don't have to use the limit you've been granted - in most cases, limits are rarely fully used anyway.  And in the current climate, I guess there's not much of it (auto increases) going on.

What they should probably do instead is insist that, where cheques are sent, the issuer has to:

a) include a prominent health warning on the covering letter - making it clear what the cost could be, and how the cheque is not included in the connected lender liability aspect of the card account, and

b)  tell them clearly how they can opt out of the programme in the future.

Likewise, with auto limit increases, it should be made more obvious where the issuer has done this, and there should be very clear instructions on how to reverse it, and opt out in the future.

We should be preserving choice, but educating people much better about the consequences of those choices and making it easier for them to opt out.  For some people, both of these elements are useful, and it allows the issuer to be flexible about how they anticipate and serve customer needs.

In any case, if HMG is to outlaw cheques, then why aren't they also outlawing the process of balance transfers, which is what most customers use cheques for anyway?  Doesn't the balance transfer process encourage people to get further into debt?


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19 Mar 2009


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