James Daley

By James Daley

Another day, another Financial Conduct Authority review. This time into the credit card market.

Just yesterday, I spoke at a conference hosted by the UK Cards Association, on the topic of what consumers really want from credit cards. While I acknowledged that the credit card industry has made some great strides to being fairer over the past decade, I also pointed out a few areas where there's work to be done. And I'm sure that these are exactly the points that the FCA's review will end up focusing on.

The end of 31 month 0% balance transfer deals

One of the biggest remaining issues for the market to resolve is that today's ultra competitive credit card market - where 0% balance transfers are available for as long as 31 months - is only commercially viable if enough customers trip up. If you take advantage of one of these competitive 0% deals, you can be disqualified and charged backdated interest on the whole balance if you miss a single payment, or don't pay your balance off in full once the deal comes ot an end. And a very large number of people do fall into this trap.

These people of course end up paying for the rest of us to benefit from 0% for months on end - and are often the very people who can least afford to pay the hundreds of pounds worth of interest that suddenly becomes due on their account because of a slip.

The right thing for the regulator to do is to put an end to these disproportionate penalties. But we should be under no illusion that this will also put an end to 31 month balance transfers. Personally, I'm fine with that. But the regulator will no doubt come in for some criticism if it is brave enough to follow that path.

Time to tackle transparency

Other remaining problems in the credit card market are a lack of transparency. Very few card providers give customers all the information about their products upfront. It's at least a decade since summary boxes were introduced, but in some cases, these are not presented to the customer until they've started applying for the card. That's simply too late.

Finding the terms and conditions is also often too difficult - and once you get there, the likelihood is they're written in legalese.

To give credit where it's due, I think the credit card market is one of the cleaner ends of the financial services industry today. Having had its charges capped by the OFT, and been strong armed into some consumer-friendly reforms at the tail end of the last government, it now looks much fairer than it did a decade ago. Indeed, the problems in today's market are not ones that the industry necessarily likes, but they are behaviours that have been driven by intense price competition. It needs a regulatory hand to solve some of these. Let's hope the FCA steps up to the challenge.