Credit Card Cheques Confusion - The Facts

Many consumers remain confused over the use of credit card cheques and could be unknowingly paying higher interests, receiving lower protection as well as increasing the potential risk of fraud.

A number of major credit card providers now issue credit card cheques to card holders and from now on will be forced to ensure that a summary box concerning information on interest rates and all related charges is enclosed with the cheques.

The UK payments association, APACS, has confirmed that the cheques must be accompanied with the same information as distributed with new credit cards. However, there are still concerns that consumers are often failing to fully understand the cheques, with customers in many cases unaware that the use of credit card cheques differs from the use of a standard credit card, especially as cheques are treated as cash advances rather than straightforward purchases.

Which? claims that there are a number of reasons why people should not be actively encouraged to make use of the cheques which are often sent out by credit card providers without requests from customers.

One major area of concern is the fact that any purchases paid for via credit card cheques do not receive crucial "section 39 protection". Such protection means that all purchases made on a credit card that cost between £100 and £30,000 are automatically covered by a joint responsibility with the credit card company. This can ensure that consumers can at least attempt to recover costs if there is a breach of contract or the purchased goods are not accurately described.

Which? spokesperson, Mike Naylor explained: "A real drawback of using credit card cheques is that you do not have this."

In the competitive industry of credit cards and low interest periods, many of the credit card cheques are often exempt from introductory no-interest offers, but consumers appear to be failing to realise this and many end up paying more when they opt to transfer balances using the cheques.

In addition, people using the cheques do not receive the usual interest-free period, a standard 56 days, they are entitled to if they pay the bill off in full by the due date, as interest charges on cheques often start from the purchase date.

Other additional hidden charges can include a handling fee of up to two per cent, therefore adding an extra £2 on to ever £100 transaction made using credit card cheques.

Mr Naylor also raised concerns over the increased risk of fraud associated with the use of cheques, especially given recent high-tech solutions to reduce possible misuse of credit cards and added: "Now we have chip and pin it seems mad to use these."

Consumer groups are calling for credit card companies to be prevented from sending unsolicited cheques to credit card holders and that any information about interest rates should be actually printed on the credit card cheque book rather than on an accompanying leaflet, in order that ensure that consumers are fully aware of the implications of using the cheques.