The best UK credit deals
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There have been some unpleasant, yet hardly surprising figures, released this week that show that RBS, which is 70% owned by the taxpayer, is charging customers more for unauthorised overdraft breaches than any other big high street lender.
Research by Which? found that although other banks have reduced their penalties to make them fairer to customers who are only overdrawn for a short time, RBS has failed to follow suit.
Bank of England figures show that the average authorised overdraft rate in July was 18.9%, the highest since 1995. At the same time, four out of five current accounts pay less than 0.1% on balances in credit and half pay no interest at all.
Rates on credit card purchases and personal loans have also risen this year although the base rate has remained at 0.5% for five months.
Here is a brief summary of the deals currently available in the UK market.
Many of the large high street banks and building societies have raised interest rates on authorised overdrafts but cut rates on balances in credit. Figures from Defaqto, a financial analyst, show that Nationwide is the worst culprit. It has increased the authorised overdraft rate on its FlexAccount by 11.5 percentage points to 18.9% in two years. Barclays meanwhile has increased its rate from 15.6% in August 2007 to 19.4%.
The Co-operative current account charges one of the lowest fees at 15.9%, down from 19.56% in August 2007.The Abbey and Alliance & Leicester current accounts, which are united under the Santander trading name, pay 6% interest for the first 12 months on balances up to £2,500 but a minimum of £1,000 must be paid in monthly.
In my opinion, the best current account without ugly small print is with Cahoot, which gives 1.1% interest on balances in credit and charges 11.8% on authorised overdrafts.
Figures provided by the comparison website moneyfacts.co.uk show that the average credit card rate on purchases has risen over the past two years from 16.5% from 18.1%.
The American Express Platinum cashback card rose from 18.9% to 19.9% last week. Nationwide increased its Classic Visa from 17.9% to 19.9% in May. The best 0% balance transfer deal is with Virgin Money’s MasterCard, which is interest-free for 16 months with 16.6% charged on new purchases.
The Barclaycard Simplicity Visa charges the lowest for purchases and balance transfers at 6.8%, with no balance transfer fee.
Rates on unsecured personal loans have gone up from an average of 8.9% in July 2007 to 13.1%. Egg is one of the worst offenders, with a rise of 4 percentage points to 13.9% on a loan of £10,000.
Some providers have lowered their rates. Although Nationwide is stinging customers with overdraft costs, it has cut the cost of personal loans for existing customers from 8.9% in August 2008 to 7.7%. For new customers, Alliance & Leicester is best at 7.9%.
The legacy of the credit crunch will continue to be poor credit deals for some time to come, especially since the banks are cashing in on the situation. However, before long the competition will return to the market and better credit deals will emerge as banks begin to undercut each other. If you can I would advise potential borrowers to wait for this moment before committing to the market.
