Over recent months the situation for many households has become increasingly worse, with increased bills, living costs, and mortgage repayments impacting on finances, with the situation being made even worse by tight credit conditions and increasingly expensive borrowing. The global credit crunch has had a profound impact on the financial industry, making things difficult for both lenders and consumers, and as a result both personal finances and the economy in general has been suffering.

Whilst many people are not only continuing to use their credit cards but have actually started relying on them the cost of borrowing on credit cards has also increased, with lenders charging higher rates of interest, increasing fees and charges, and slashing credit limits in some cases. Most people are only too aware that one of the most expensive ways to use a credit card is to withdraw money on it, as the charges and interest applied for this sort of transaction can be phenomenal. However, it seems that one provider is playing on consumers’ dire financial situations in order to tempt them into taking out cash on their credit cards and then hitting them with extortionate charges.

Barclaycard has found itself at the centre of controversy after it was accused of trying to railroad customers into withdrawing cash on their cards, which would cost them four times more than a personal loan in terms of charges and interest. The credit card giant has been sending letters out to customers tempting them with the offer of instant cash – which they have to withdraw on their credit cards. In addition to this the card provider has raised the limit on cash withdrawals to further entice customers to use this costly route.

It is easy to see how consumers may be easily tempted into doing this with just a gentle nudge from the card provider, and with many struggling to keep afloat financially getting ‘easy’ money could be just the answer. But these cash withdrawals come at a very high price, as consumers will be charged 27.9% interest as well as a 2.5% fee with a minimum of £2.50.

One official from the charity Credit Action said that the campaign was in very bad taste, stating: ‘When we are going through one of the worst periods of financial turmoil for many years, when people are really starting to struggle with their bills, this type of letter is grossly irresponsible. Making cash withdrawals appear more normal in this way, like an everyday activity, is extremely bad advice. It may be good for the company but it is dreadful for the consumer.’

An official from National Debtline said: ‘If you are taking cash out on your credit card to pay for a cup of coffee or a newspaper then you really are in financial difficulty. There are dozens of cheaper ways to get money for these items. It is a classic symptom of someone who does not have enough to pay day-to-day bills. You really shouldn’t be encouraged to do this.’

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