. . . but providers see new openings

Consumers felt the hit in their pockets last Tuesday as the Government's increases in stamp duty for credit, charge, debit and ATM cards took effect

Stamp duty on credit and charge cards more than doubled in the last Budget, increasing from 19 to 40. Laser cards, which had been exempt from stamp duty, are now subject to a 10 charge. Duty on ATM cards increases from 6.25 to 10, while cards with a combined cash and laser function will cost 20 a year, also up from 6.25.

The charges are usually deducted from cardholder accounts on April 1st every year.

Credit card providers are at pains to point out that stamp duty is not an additional charge randomly set by industry. Rather, it is a measure over which they have no control.

However, consumers are unlikely to care too much about exactly why a credit card now costs 40 annually. Those who use multiple cards to spread their bills and benefit from additional credit limits may simply vote with their scissors and rid themselves of their wallet-burning plastic.

The Irish Bankers' Federation (IBF) has lobbied against the new rates of stamp duty. According to a recent IBF bulletin, the holders of more than 1.7 million credit cards are being heavily penalised for successfully adopting plastic cards as a cost-effective, safe, secure and convenient way of conducting their banking business.

Few EU governments impose stamp duty or other taxes on bank plastic cards, the IBF argues.

Despite the increase, new products have made their debut on the credit card market in 2003. At the launch of a Ryanair-branded MBNA credit card in February, Mr Ian O'Doherty, regional director of MBNA Ireland, said he believed consumers would chop all but one of their cards in half, keeping the one they felt represented the best value.

Some card providers have spotted new marketing opportunities in the Government's move.

Ulster Bank has decided that credit card customers who spend more than 5,000 in a year will receive a €40 loyalty reward to compensate them for the increased level of stamp duty. Some 1,000 customers have already reached the 5,000 target and received the reward, says Mr Andrew Healy, head of credit cards at Ulster Bank.

"We got quite a negative reaction to the stamp duty from customers for what they see as a method of payment for ordering goods over the telephone or on the internet," says Mr Healy. "They felt it was a lifestyle tax, really."

Ulster Bank has included its 40 reward on its new zinc card, which, at 12.9 per cent, has the best interest rate in the market, shaving the rate on MBNA's platinum card by 1 per cent. Both cards require that customers have a minimum income of €30,000, although MBNA says it approves applications on a case-by-case basis.

Stamp duty applies to each charge card but, in the case of credit cards, is levied on the account. When applying for a card, users can nominate between one and three additional cardholders on the account.

Mr Healy says there is some evidence that people, for example a husband and wife, were increasingly opting for two cards on the one account rather than two accounts to avoid paying two stamp duty charges.