Over half of credit card users don’t know the interest rate they are paying. The answer, just in case you’re wondering, is “a lot”. If you are one of those people who regard the amount of money you’re allowed to spend on your credit card as a target – not a limit – you’re going to get into trouble.

Credit card interest rates range from 9.5 per cent (NIB) to 18.9 per cent (American Express) according to the latest survey compiled by the Financial Regulator. NIB (9.4 per cent), Halifax (9.5 per cent) and Ptsb (9.9 per cent) came out cheapest.

However, with NIB you have to open a current account that includes a fee if you want to avail of the offer. You can get a Visa card at 10.7 per cent APR that doesn’t require you to open any bank account, which puts it slightly lower down the value table. On the plus side, NIB charges the same interest on cash withdrawals as purchases whereas most banks add on a couple of per cent.

When it comes to charges for late payments, be wary of MBNA, (issuer of One Direct and EBS cards also). You’ll be hit for €15.24 for late payments, €12.70 for exceeding your credit limit and a painful €19.05 for unpaid items. Ouch!

The Regulator’s research also shows that 45 per cent of credit card holders surveyed do not pay their balance in full each month, and are thus hit with hefty interest. Despite their name, credit cards are not a good form of credit. Those who don’t pay off their bill are helping banks rack up big profits.

They’d be much better off joining the 55 per cent of people who do clear their bills. They are actually getting one over on the banks, and availing of a great service – for free.

Making Repayments

Mary O’Dea, consumer director of the Financial Regulator, advises users to always pay off as much as they can afford. “Don’t miss any repayments and don’t use your card again until the balance is paid off,” she says. By just making minimum repayments, it could take 20 years to clear your bill.

If your plastic money debt becomes unmanageable, one form of relief is to switch providers to take advantage of low introductory rates. These vary from 0 per cent to 9.9 per cent for between five and 12 months – (though the latter rate is hardly worth the hassle of switching). However, those who switch to pay less interest should beware that the same rate may not apply to new purchases as to balance transfers.

The survey shows that while some consumers become rate tarts, switching providers in pursuit of a better deal, most are remarkably chaste. Around 93 per cent of credit card holders have not switched credit card provider in the past 12 months. Only half of these said it was because they are happy with their current provider – and the explanation for the rest might be good old consumer inertia.

Copies of a guide to credit cards and the new credit card cost survey are available by calling the consumer help-line on 1890 77 77 77, logging on to www.itsyourmoney.ie or by calling into the Consumer Information Centre at College Green, Dublin 2.

Stamp Duty

You can’t blame the banks for stamp duty – it’s the Government’s fault, specifically Charlie McCreevy, who introduced it some years ago as Finance Minister. However, shame also on Brian Cowen for not doing away with it. At a time when we should be encouraging electronic money transactions to fight crime, we are instead imposing a tax on it. Though maybe a party led by a fella who admits saving 50 grand with no bank account, while Finance Minister, doesn’t see the need for electronic transactions.

Apart from that, the tax discourages competition by penalising people for having more than one card. You pay €40 a year for each credit card account (regardless of how many cards are on it). Your credit card provider collects the stamp duty by adding €40 to your bill at the beginning of April each year and then passes it on to the Government.

If you close an account and then open another, you don’t have to pay the stamp duty twice. You’ll be charged €40 when you close your old account. Then you’ll get a “letter of closure” to give to your new credit card provider to prove that you have already paid the stamp duty for the year.

This letter is important, the Regulator advises, as a credit card provider will only issue it once. You should pass it on to your new provider as soon as possible.

Tackling Credit Card Debt

If you do fall behind, the Financial Regulator advises that you have various options:Make a plan to pay off as much as you can afford each month and set up a direct debit for this amount. Stick to your plan and do not use the card until you have cleared the balance.

Think about getting a personal loan from a bank or credit union, use it to pay off your credit card and avoid using your card until you have paid off the loan.

Switch to a credit card that offers a low rate or zero interest on balance transfers for a limited period.

Then:

• Cancel your old card.Try to clear your debt before the low or zero rate period runs out. After this a higher rate will apply.
• Don’t use your new card until you have cleared your debt.
• If you are in serious difficulty with debt contact the Money Advice and Budgeting Service (MABS).