No more extra credit charges for April fools

April 1st, the date that traditionally gives licence to all manner of practical joke players, is also the day on which the Government embarks on a mass stealth-tax exercise, swiping €40 from the accounts of all credit-card users.

But today is the last day that the credit-card stamp duty, labelled a "tax on technology" by the banking industry, will apply to each credit card held by consumers over the course of the previous year.

From now on, consumers will be able to switch from card to card without racking up a €40 charge each time.

The old card provider will deduct the stamp duty for the April 2005-March 2006 period and give them a "letter of closure" confirming that they have paid the charge for that year. Under Revenue rules, the consumer must then give this letter to their new card provider to avoid the double charge.

The change coincides with another breakthrough: the age of double-digit interest rates on credit cards is set to be smashed to pieces by the arrival of Permanent TSB's Ice credit card.

The Ice card, available from next week, is being launched with a standard variable interest rate of 9.9 per cent APR on purchases, slicing a full 1 per cent off its next closest rivals, EBS and One Direct's gold card.

The standard annual percentage rate of interest (APR), however, is only one indication of whether a credit card is good value.

As the overall cost of a particular credit card will depend on a person's spending and bill payment patterns, the Irish Financial Services Regulatory Authority (Ifsra) advises consumers that examining the way in which they handle credit will help them choose the right card.

If you have built up a large outstanding balance:

A credit card with a 0 per cent introductory rate on balance transfers is a good place to start. Switching to Permanent TSB's card won't be the best option in the short-term, because its balance transfer rate is 2.9 per cent APR.

Ulster Bank, Tesco Personal Finance, National Irish Bank (NIB) and AIB all freeze the interest payable on balances transferred from other credit cards. The longest interest-free period is available from Ulster Bank, which allows new customers up to nine months to clear an outstanding debt before applying interest.

Consumers who want to keep on spending on credit after the switch, should note that Ulster Bank, Tesco and NIB also have a 0 per cent introductory rate on purchases.

But those that switch to AIB will have to pay the standard APR of either 18.9 per cent on its classic card or 14.25 per cent on its gold card on any further splurges that they fail to pay off by the statement due date.

If you regularly fail to pay off your outstanding balance:

Almost 50 per cent of credit card users let debts amass by not clearing their outstanding balance each month.

Many cardholders are surprised to discover that even if they pay off the bulk of the balance on their statement and just carry a small portion of the debt over until the next month, they will be charged interest on the full amount. Leave the debt to fester, and they start paying interest on interest.

Credit-addicted consumers should first of all shop around for a card with a low standard rate of interest.

Permanent TSB's Ice card is currently the lowest but it is restricted to people with a minimum income of €30,000 per annum.

EBS and One Direct Gold, meanwhile, have minimum salary requirements of just €19,000 and €25,000 respectively. Both have a standard APR of 10.9 per cent.

Ifsra advises that people who tend to carry over most of their balance each month should opt for a card that requires a high minimum payment each month.

On AIB, EBS, Permanent TSB and NIB's standard card, holders are required to pay a minimum of 5 per cent of their balance each month, compared to just 2.25 per cent at MBNA and One Direct.

Consumers should also compare late payment charges and ensure to avoid these as much as possible, according to Ifsra. Late payment fees range from nothing at all at Bank of Ireland, NIB and Permanent TSB to €15.24 at MBNA and One Direct.

If you usually pay off your balance in full by the due date:

"Look for a card that offers low fees and charges. You will usually avoid interest, so the APR is not as important for you," Ifsra notes.

Details of the myriad fees and charges attached to credit cards are included in Ifsra's credit card cost surveys, which are available to download from www.itsyourmoney.ie or by calling its consumer helpline on 1890 777 777.

One example is the fee charged on non-euro purchases - a significant cost for people who frequently use their card abroad or buy goods in different currencies from online retailers.

On most cards, non-euro purchase fees are 1.75 per cent of the value of the transaction. Again, MBNA and One Direct are more expensive, charging 2.65 per cent.

For consumers who always pay off their full balance on time and don't opt for expensive payment protection or insurance policies on their cards, the annual €40 stamp duty will be the biggest expense of paying by plastic.

Some card providers may offer to pay the stamp duty on behalf of customers. For example, Ulster Bank will pay the duty if customers spend more than €5,000 a year on their card.

If you want to make cash withdrawals:

If you like your credit to take the form of wads of crisp notes emerging magically from an ATM, then make sure that your credit card offers an interest-free period on cash.

AIB, Bank of Ireland, American Express and Barclaycard all offer an interest-free period of up to 56 days on cash withdrawals, which could be a handy facility if you have just exhausted your current account but expect to be paid in a couple of days' time.

But cash withdrawals should be avoided on credit cards provided by EBS, MBNA, NIB, One Direct, Permanent TSB, Tesco and Ulster Bank, as interest will be charged from the withdrawal or statement date until the balance is paid off.

The APRs on cash withdrawals are usually higher too, ranging from 10.9 per cent to over 20 per cent, meaning arranging an overdraft on your current account will often be a better way to access cash on short-term credit.

If it is all spiralling out of control:

Credit cards are an expensive type of short-term credit. In the case of a persistently high outstanding balance that you just cannot afford to pay off, some card providers may agree to convert the debt into a personal loan to be repaid over a longer term, thus resulting in more-manageable monthly repayments.

The card providers will only do this if they think it is the only way they will get their money back.

In the UK, Barclaycard has just launched a product that allows customers to move their card balance three times a year into a separate loan "pot" with a lower interest rate. But the product is not available to Barclaycard customers in the Republic.

If your stubbornly high credit-card balance is part of a wider debt problem, consider seeking help from the Money Advice and Budgeting Service (MABS).

If you want to reform your habits:

Setting up a direct debit agreement that pays off your full balance each month is one way to avoid the temptation of letting credit card debts amass.

But if you are spending more than you earn, this may simply result in an unauthorised overdraft on your current account, and all kinds of other fees and associated surcharges.

Consumers burnt by their plastic habits may have to break the cycle of debt the old-fashioned way: by taking a pair of scissors and chopping their way to a credit-free existence.