18 October 2003

Sir

Credit cards not for borrowing

Matt Barrett, the Barclays chief executive, is right to admit (News, Oct 17) that he does not borrow on credit cards because it is too expensive.

I helped prepare the arguments for Barclays in 1981 when credit cards were first subjected to the public scrutiny of the Monopolies and Mergers Commission. There was also a second inquiry in 1989. On both occasions, the MMC concluded there was no case for interfering with interest rate pricing.

The industry is still subject to the classic cross-subsidisation without which plastic card technology could not have developed. The cost of the benefit of international use is not borne equally; the cost of the benefit of the free credit period is not borne equally; and since the last MMC inquiry introduced the 1990 Price Discrimination Order, the cost of the benefit to retailers has not been borne equally.

The result, though, is that consumers have a convenient and flexible method of shopping, and retailers have a secure low-cost money transmission system. Moreover, the extensive competition that now exists was unimaginable more than 20 years ago, when we made our original submissions. I find it surprising, after all this time, that some cardholders still insist on using a product designed for optimum convenience as their preferred line of long-term credit, when there are so many cheaper options available.

Mr Barrett is not "doing a Ratner". He is stating a fact that has been patently obvious since day one. In 1966, Barclaycard was launched with the slogan: Barclaycard Makes Shopping Simpler. It did then. It does now.

From:

Mike Allott 

Eastleigh 

Hants

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