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
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Credit Card Provider
Northern Bank
Green/Ethical Products
- Basic Bank Account
- Parent Study Loan
Ethical Lending or Insurance
The bank does not have an ethical lending policy.
Responsible Lending
1. Credit Lending
Northern Bank offers a maximum LTV (loan-to-value) mortgage rate of 90%. This compares 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 sole applicants.
The bank states that its loan application assessment process ‘may’ involve credit scoring. It is not clear whether this is based solely on information submitted by the applicant or whether checks are done with credit reference agencies.
No specific information was found as to whether a policy was in place to avoid or prevent offering unrequested increases in credit limits to customers.
2. Debt Warning
The bank issues the following warning to its mortgage customers: ‘Your home may be at risk if you do not keep up repayments on your mortgage or any other debt secured on it.’
No warnings were found in relation to the consequences of falling behind on payments on unsecured credit.
No evidence was found that the bank uses or recommends the FSA Debt Test or an equivalent service. This facility is designed to help customers find out whether they have, or are likely to have, problems with borrowing.
3. Debt Management and Advice
In presenting the options/steps it will take to assist customers in financial difficulty, the bank says that it will:
- Contact customers at an early stage to discuss their problems
- Try to arrange a new, mutually agreed payment plan
- Look at changing the interest rate on the mortgage or change the way payments are made
- Consider allowing the customer to pay back the loan over a longer period of time, thus reducing monthly payments but increasing the overall cost of the loan
- Consider allowing the customer to pay reduced payments or just the interest payments for a period of time
- Supply details of organisations who can give debt advice (for example, Citizens Advice Bureau), and talk to them if requested
The bank does not provide information on the steps leading up to repossession or court action.
Payment holidays may be available on secured loans but the necessary circumstances are not publicly outlined.
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
Northern Bank offers a basic bank account to low income customers as well as a low-rate Parent Study Loan.
In terms of access, Northern Bank offers its product literature in Braille, large print and audio tape, on request.
It does not work in partnership with any credit unions or similar mutual organisations nor does it offer preferential lending within deprived communities. Furthermore the bank does not provide funding to microfinance projects.
Environment
The parent company’s environmental policy addresses the key issues of energy efficiency and waste management. It also states a commitment to the continued improvement its environmental performance.
Carbon Neutral
The parent company has pledged to make its business operations carbon neutral by late 2009.
Equal Opportunities
While the parent company’s policy makes reference to race, gender and sexual orientation, we could find no evidence that its equal opportunities policy extends to staff with disabilities.
Women on the Board
33% of parent company, Danske Bank Group's, board are women.
Voluntary Standards & Initiatives
Parent company is a signatory/member of:
Charitable Giving
The parent company, Danske Bank Group contributed DKr 29m, c. £3m, or just under 1% of its pre-tax profits, in donations in 2007.
Northern Bank
- Current Accounts
- Credit Cards
- Loans
- Savings and Investments
- Mortgages
- Insurance (Home, Life, Critical Illness, Repayment Protection)
