Credit Card Overview
Fact: there are more credit cards than people in Britain and the country's debt problems are amongst the worst in the world.
When choosing a card provider, its policies on responsible lending and debt advice provision are of key importance. The green and ethical concerns you bring to who you bank with, concerns about equal opportunities or the environment, are just as applicable to who you get your credit card from.
This section also looks at the green or ethical worth, as well as the practicalities of charity affinity cards.
Does your credit card provider treat its customers responsibly?
What are charity affinity cards and how do they work?
Does your credit card provider treat its customers responsibly?
Responsible lending
According to the British Banker's Association (BBA), responsible lending means 'providing credit, based on background checks and professional judgement, to people who can accommodate repayments without getting into financial difficulty'. As the sheer number of people in debt today shows, these principles are not always well applied by credit lending institutions. In 2008 our credit card debt hit £54.4bn and continues to rise.
Transparency is key - credit card customers should be presented with the terms and conditions attached to their card up front and in plain English. It is important to check whether your provider has a responsible lending policy in place, and how it is implemented if it does exist.
Debt management
Credit card debt is all too common in the UK. Some financial institutions offer basic in-house debt advice services, the scope of which can vary greatly. Often providers will refer customers to free advice services including the Consumer Credit Counselling Service, the Citizens Advice Bureau and others.
Use our search tool to find details of your provider's debt management services. Information on this subject can be found under 'Responsibility toward Customers'. Alternatively contact your provider directly for further information.
What are charity affinity cards and how do they work?
Affinity card providers make a small donation on behalf of the card holder to the charity it is associated with.
Such charity donations average around 25p per £100 spent. So, in order to donate £100 to your charity of choice you'd have to spend £40,000 with the card. Most providers also make a one-off donation of between £5 and £25 on each new card account.
In their analysis of charity affinity cards moneysavingexpert.com suggest that a more effective way to donate money is to use cash back cards. Cash back cards operate in much the same way as affinity cards except that instead of a charity, additional money goes to the card holder and this money is usually considerably more than a standard charity card donation. The cash back card holder can then donate the money they have earned to the charity of their choice and if eligible, Gift Aid it, so rather than £1 the charity will receive £1.28. Donations on affinity cards are not eligible for Gift Aid.
View the range of charity affinity cards available on the market click here.
Your next steps
See our guide Next Steps - Credit Cards for more suggestions on how to find out about your credit card provider's green and ethical policies, how to contact them and how to find the right credit card for you.
Credit Card Search
Credit Card Provider
Clydesdale Bank
Green/Ethical Products
- Basic Bank Account (Readycash)
- Personal insurance for terminal/critical illness and disability
Ethical Lending or Insurance
Parent company, NAB (National Australia Bank) has a policy not to finance the arms trade, whether it is conventional arms (including landmines or any equipment designed to be used as an instrument of torture) or nuclear, chemical, biological or other weapons of mass destruction. It also has policies on tobacco, pornography and animal testing. NAB has internal credit policies on the environmental impact of its lending and signed up to the United Nations Environmental Programme for Financial Institutions, which outlines criteria for investment in developing countries. In 2007 NAB became a signatory to the revised Equator Principles which provide criteria for lending to large project finance initiatives.
Responsible Lending
1. Credit Lending
The Clydesdale Bank offers an LTV (loan-to-value) mortgage rate of up to 80%. This compares very favourably with the FSA’s Turner Review which suggests LTV rates should be no greater than 90%, i.e. that customers should have at least a 10% deposit.
No information on the bank’s LTI (loan-to-income) rate was found. The Turner Review suggests a rate of 3.5 times income for single applicants.
The bank uses credit scoring to assess loan applications. However, it is not clear if the scoring is based on information submitted by the applicant only or if information from credit reference agencies is included.
While no specific information as to whether a policy is in place to avoid or prevent offering unrequested increases in credit limits to customers, the bank has a customer care unit which gives advice about operating credit card accounts and financial management. Customers can request a reduction in their credit limit and change their bill payment dates to align better with their income streams. The unit refers some customers to the National Debtline.
2. Debt Warning
The bank issues a generic warning to mortgage customers: ‘Your home may be repossessed if you do not keep up repayments on your mortgage.’ No warnings were found about the consequences of not making repayments on time or running up debts for unsecured credit customers.
Customers are not referred to the FSA Debt Test or equivalent test. This test is designed to help customers find out whether they have, or are likely to have, problems with borrowing. It also has tips on what to do if customers find themselves in difficulty.
3. Debt Management and Advice
No policies were found on handling customers who have defaulted on their payments or fallen into financial difficulty. Nor are the steps leading up to repossession or court action outlined.
With regard to payment holidays on secured loans, the bank states that they are available for up to six months on residential mortgages, though it is not specified how a customer might qualify. Payment holidays are not allowed on unsecured loans, though first payments may be deferred until the 14th day in the case of a loan repaid weekly and the 56th day in the case of a loan repaid monthly.
No evidence was found that the bank offers re-housing advice or liaises with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements with mortgage customers facing re-possession.
Financial Exclusion
The bank offers the Readycash basic bank account to low-income customers.
The bank provides access services for disabled customers in the form of talking ATMs, documentation in Braille, in-branch provisions and accessible website features.
Environment
A management system is in place to set targets and monitor progress and the bank expresses a commitment to continued improvement of its environmental performance. We could not find specific details of the policy and the issues it seeks to address e.g. energy efficiency and waste management.
Carbon Neutral
The bank has pledged to make its business operations carbon neutral by 2010.
Equal Opportunities
No reference to employees with disabilities was found in the bank’s equal opportunities policy statement.
Women on the Board
The bank reported a figure of 11.1% for 2007.
Voluntary Standards & Initiatives
Parent company is a signatory/member of:
- United Nations Environment Programme for Financial Institutions (UNEP FI)
- Carbon Disclosure Project
- Equator Principles
Charitable Giving
NAB reports that 0.47% of pre-tax profits were donated to community investment in 2007 (includes cash, sponsorship, employee volunteering, management costs, charitable gifts).
Clydesdale Bank
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Life, Critical Illness)
- Student Current Account
