Personal pricing clouds card decisions


Personal pricing clouding credit card decisionsFinding the best credit card deal took on increased importance during the economic downturn as consumers attempted to juggle their debts. A new report has now suggested that personal pricing is making it difficult to judge which providers are likely to offer the most competitive interest rates.

What is personal pricing?
Personal pricing is a technique employed by credit card companies which sees an individual's financial circumstances dictate the interest rate they will be eligible for. According to a study by Defaqto, two-thirds of consumers who are offered credit cards typically receive the best rate, with the remaining third being placed on a more expensive deal. David Black, a banking specialist at the independent financial research company, explained that the trend is a result of providers tightening their lending conditions in the current economic landscape.

"It always used to be fairly straightforward to get a credit card, but providers have become increasingly choosy about who they will lend to and, if they will lend, at what rate," he said. "Many consumers don't even get to that stage because the number of credit card applications being rejected has shot up."

However, the Defaqto study found that not all credit card providers are evasive about personal pricing. Indeed, a number of credit cards are now advertised with a typical APR and a higher rate for certain individuals. The companies offering this information include Capital One, Egg, Halifax, HSBC, M&S Money, Sainsbury's Finance, SAV Credit, Tesco Bank and Vanquis Bank.

Star ratings
Defaqto also operates a Star Rating system, which allows consumers to assess the features offered by each credit card in order to pick one which is best suited to their needs. Of the providers mentioned above, top billing (a five-star rating) was given to Tesco Bank's Clubcard Credit Card, which offers typical and personal pricing rates of 16.9% and 19.9% respectively. Sainsbury's Finance was awarded four stars for its credit card deal, while SAV Credit's Aqua Card and Vanquis Bank's Visa Card were both at the foot of the list with one star. "A one or two-star-rated card is not a bad choice, it just doesn't have the bells and whistles of a four or five-star-rated card," concluded Brian Brown, head of research at Defaqto. Founded in 1994, Defaqto now provides data on over 30,000 financial products, covering banking, life, pensions, investments and general insurance.

Published: 29 April 2010