Page last updated at 15:54 GMT, Thursday, 18 March 2010

MBNA to stop credit card cheques

Credit cards

The biggest issuer of credit card cheques in the UK - MBNA - is to stop issuing them to customers from 31 March.

The decision comes ahead of a ban on unsolicited credit card cheques that will become law later in the year.

MBNA said the move came as a result of consumer demand.

Campaigners have called for other providers to withdraw the cheques which often have high interest rates and charge interest immediately after use.

Credit card cheques are blank cheques sent out by card issuers to their customers, often with a statement, giving them an alternative way to spend on their card account.

Lenders will be able to issue them to people who request them when the new government rules come into force.

Changes

Greg Reed, chief marketing officer for Bank of America Europe Card Services, which operates the MBNA brand, said no orders for cheques would be accepted after 31 March, but customers could use the ones they still had.

Sending these cheques to people with little financial discipline or willpower was akin to posting bars of chocolate through a school letterbox
Andrew Hagger, Moneynet

"While credit card cheques are still valued by many of our customers, we acknowledge that, increasingly, the majority of our customers are choosing to access their accounts by other means," he said.

Interest charged on credit card cheques is often higher than on normal purchases by credit card, and - unlike cards - there is no interest-free period. There is also less protection if things go wrong and there are handling fees charged for their use.

This has made them the target of criticism from consumer groups who believe they can be used by people already facing spiralling debts.

"The announcement from MBNA that it will stop issuing credit card cheques from the end of this month is most welcome and should be followed by the rest of the industry," said Andrew Hagger of Moneynet.

"One of the big problems has been that people who have been under financial pressure have seen a credit card cheque as an easy way of boosting their bank balance and to buy themselves some breathing space.

"Sending these cheques to people with little financial discipline or willpower was akin to posting bars of chocolate through a school letterbox."

He said they were also intercepted by fraudsters who used them without the credit card owner's knowledge until they got the bill.



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