Getting the most from your credit card

Although Irish consumers have been relatively slow to embrace credit cards, with only a comparatively low 21 per cent of adults possessing this particular version of plastic money, the advent of the euro and a dual currency period is expected to provide a fresh impetus to do away with cash. Credit cards are convenient, secure and flexible, according to Visa International. Convenient, because the money is always on you; secure, because, if lost or stolen, you can cancel it; and flexible, because of the access to currency and goods across jurisdictions "at wholesale rates", said a Visa spokesman.

Being provided with itemised monthly statements can also be a handy way of keeping account of your affairs and making business expense claims.

The downside of the plastic cards is that when they go wrong, they go very wrong. Their use requires considerable personal discipline to avoid running up large interest bills. The buy-today pay-tomorrow facility can lead card holders into financial difficulties.

Holders also need to be conscious of the dangers of creditcard fraud which amounted to $136.5 million (£96 million) in the EU in 1996, or 0.04 per cent of the $341 billion worth of transactions.

In Ireland, about £2 million is lost through all fraudulent plastic-card transactions annually, according to an industry source. But the threat of large-scale scams has increased as foreign gangs move in using bogus credit cards, says Insp John McKeon of the Garda Bureau of Fraud Investigation. Card fraud occurs in its most simple form when a card is lost or stolen and it is not immediately missed. A fraudster can go on a spree by forging the signature. If he has the credit card number and expiry date, he can order over the phone, and if he intercepts the unsigned card in the post, he can use it as his own.

He can fraudulently apply for a credit card, using your bank account number, or he can provide a bogus bank account number in some instances. Additional items can be charged onto your bill by a dishonest vendor and if you unwittingly sign for them, you pay.

At the sophisticated end of fraud, duplicate cards can be manufactured as copying techniques become more refined.

The changeover to the new euro currency will provide a timely opportunity to go "straight from punt to getting euro on plastic" as one Visa executive said, and, as if in anticipation, the number of card carriers is steadily increasing.

"The growth rates over the past few years have been quite enormous," says Mr Colin Baptie of Visa, pointing to figures which show a daily spend of $1 billion on the Visa card in the EU and a new card being issued every two seconds.

"Card holding spending increased by 24 per cent last year. The amount spent is $392.2 billion," he says.

Estimates give the number of Irish outlets which are credit-card friendly at between 25,000 and 30,000.

Credit card companies are owned by banks, with Visa, for example, having 21,000 bank owners worldwide.

According to Visa, 643,000 people have its cards in Ireland, up from 602,000 or 6.8 per cent in 1996, while expenditure on the cards increased by 25.7 per cent last year to $2.45 billion.

MasterCard, the other major credit-card operator in the Irish market, has 309,000 cards in circulation, an increase of 20 per cent on 1996. Some £644 million changes hands last year. The annual percentage rate (APR) of interest on unpaid bills or cash withdrawals is the main point of comparison between the schemes offered by the various financial institutions. These rates vary widely, with more than seven percentage points between the highest, Irish Nationwide, at 26.2 per cent, and the lowest, MBNA, at 18.9 per cent, on the rates applied to unpaid purchases.

Institutions can trumpet low APRs or, increasingly, loyalty schemes to entice more customers. National Irish Bank (NIB) and Hibernian are currently offering loyalty schemes, awarding, in the case of NIB, one point for each £2 spent at one of its SuperClub outlets. Eircell also has its own scheme, offering points redeemable against a mobile phone bill once users shop in certain stores. Apart from the annual Government tax of £15, there should be no reason why a credit card costs anything if: the monthly bills are paid in full; the customer participates in a scheme which does not have an annual fee; and cash withdrawals are avoided.

In fact, most Irish people have remained canny in the use of their cards, with three quarters spending less than £250 a month, mostly on clothing and travel-related expenses, and a similar proportion clearing their balance each month thereby avoiding interest payments. As Bank of Ireland points out: "If your account is paid off in full by the due date, it means that using your credit card could actually be cheaper than paying for something by cheque as no interest is charged to the account".

According to Visa International, it is only in the US, Britain and Ireland, that the credit card rules supreme.

"In the rest of the world, it is debit cards. Visa is synonymous with debit cards in Europe, outside of the UK and Ireland," Mr Baptie says. Including more big-spending, but less bill-conscientious customers will be one avenue of expansion for the financial institutions, and there are lucrative pickings among the 66 per cent of the AB and C1 categories who do not possess a credit card. But with bank over-charging a sensitive issue, they would do well to tread warily.

AIB

AIB offers an APR (annual percentage rate) of 23.73 per cent on purchases, 25.58 per cent on cash, but charges an annual £10 fee after the first year if the card is used less than 50 times a year. In common with the schemes of most other institutions, up to 56 days of interest-free credit is provided. If you do not pay your balance in full in any given month, interest is charged from the date each transaction is posted to your account. A handling charge of 1.5 per cent applies to a cash advance over your credit balance. There is also an over-credit limit charge of £2 and a late payment charge of £3. A bonus to regular travellers paying at their own expense, the AIB Visa or MasterCard offers the incentive of up to £50,000 free personal accident insurance when the card is used to pay for travel tickets. Users can also avail of a Payment Protection Insurance scheme, take out a second card for a partner or family member, and take advantage of reduced phone bills with a Telecom Eireann tiein.

Bank Of Ireland

Bank of Ireland's APR on missed monthly repayments is 25.5 per cent on purchases, and 25.1 per cent on cash, which includes the £8 annual fee. This translates into a minimum monthly repayment of "at least £5 or 5 per cent of what you owe, whichever is greater". It also has a 1.5 per cent cash advance fee (minimum £2). The bank will give up to three additional cards on your account for other people. It provides a Twin Account option - allowing both a Visa and a MasterCard on the account. In common with most others, it offers an insurance scheme covering all the plastic cards in your wallet and runs a Payment Protection Insurance scheme, repaying 10 per cent of a monthly balance up to a £500 maximum in the event of accident, illness, unemployment or death.

Hibernian

Hibernian's new Swift Points Card offers one of the lowest rates, a 19.9 per cent APR on purchases and cash, and, similarly to AIB, waives the annual fee of £8 if the card is used at least 50 times annually. To attract new card holders, As an enticement scheme, if a customer transfers a balance over from another credit card to Hibernian, a special low interest rate of 13.9 per cent APR applies for six months.

A loyalty card scheme is also operated where "you will earn an average of 5 per cent of the amount of your purchase in Swift points" by making purchases at 15 outlets, including Jurys, Clerys and Atlantic Homecare. Payment and card protection insurance and free personal accident travel insurance are also available. A late payment fee of £12 and an over limit fee of £10 apply after the account is over six months old. and The cash advance charge is 1.5 per cent (minimum £2).

TSB Bank

TSB Bank offers a 23.1 per cent APR on purchases and cash, but charges from the date of the statement as opposed to the date of the purchase, allowing a 25-day period in which to clear the amount. According to the bank, charging from the date of the statement amounts to a saving of up to seven weeks interest. Free travel accident insurance of up to £15,000 is available. A maximum £100 a day can be withdrawn from ATM machines. Other schemes, such as Bank of Ireland's, allow up to £500 a day.

ACCBANK

ACCBANK Visa Card comes in at third place for low APR rates, offering 21 per cent on purchases and cash. It does not charge an annual fee, and, similarly to TSB, charges from the statement date as opposed to the purchase/transaction date. A second card is provided free of charge, and, with your PIN, daily cash withdrawals of £200 can be made.

MBNA

MBNA Ireland has been in Ireland for over operating here for more than a year on low overheads, operating from a call centre in Dublin. It relies on intensive mail shots to market a Visa card that has an 18.9 per cent APR on purchases and cash, the lowest on the Irish market, and a credit limit of up to £15,000.

It also poaches existing cardholders by offering an APR which is five percentage points lower, at 13.9 per cent, for the first six months of a transferred account.

"Our aim is to offer an exceptional product at a moderate rate," says Mr Paul Campbell, of MBNA.