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American Express saw first quarter profits decline 6%, after the number of cardholders failing to pay off their debts increased.

Profits for the three months to 31 March fell to $991m from $1.06bn a year earlier, but beat forecasts.

The firm set aside $1.27bn for credit losses during the period, representing a 48% increase year-on-year.

But while profits fell in the US, the profits overseas rose and the firm expects such growth to continue.

“While we continue to be cautious about the US economy, we are encouraged by our performance internationally,” said chief executive Kenneth Chenault.

US card service profits fell 19% to $523m but international profits climbed 30% to $133m.

Shares in the firm added 3% in after hours trading.

Data from the Association of Payment Clearing Services (Apacs) reveal that the UK’s 31.5 million credit card holders spent £32.3 billion in the last three months of 2007 - the second-highest sum on record, beaten only by the final quarter of 2004, when cheap credit card deals were more readily available.

Although some of the increased spending on food in December can be attributed to higher prices, recent figures show that the cost of food and drink has risen by only about 6 per cent in the past year, raising fears that more households are relying on credit to fund essential spending.

Chris Tapp, of Credit Action, a debt charity, said: “As household budgets are squeezed, people may start to use their credit cards to pay for shopping. This is a warning sign. While some people will be taking advantage of special credit card deals to earn points or cash back, many others will be simply using their card to put off paying the bill.”

Britons are twice as likely to have a credit card as people in any other country in Western Europe, a report shows.

The average Briton had 1.4 credit cards in their wallet at the end of 2006, twice as many as second-place Norway, where people had an average of just 0.7 of the cards each, according to market analyst Datamonitor.

At the other end of the scale only one in every 16 cards in Germany is a credit card, rising only slightly to one in 10 in Sweden, Denmark and France.

Britons’ extensive use of credit cards has seen them collectively run up £54.93 billion in plastic debt at the end of 2007, according to Bank of England figures.

Datamonitor said people’s approach to credit cards in the UK was different to their counterparts in Europe, with consumers having a more relaxed attitude towards debt.

At the same time, people in the UK are also increasingly taking advantage of 0% introductory offers to shift outstanding balances from one card to another.

Author of the report Andrew Fabricius, said: “The high penetration of credit cards in the UK is due to consumers being happy to pay for goods and services by using credit and enjoy the flexibility of paying for purchases over a longer period of time.”

He said by contrast, consumers in Germany had a far more disciplined attitude towards expenditure, and as a result credit cards were far less popular in the country.

The UK also has the highest number of payment cards overall, with the average Briton having 2.8 credit or debit cards in their wallet at the end of 2006, and the number looks set to increase to an average of three by 2011.

The UK is well ahead of other European countries in terms of payment cards per adult, with even second place Norway lagging considerably behind, with Norwegians having an average of just 2.3 cards each, while people in France have an average of only one payment card per person.

Egg credit card holders who have had their accounts cancelled were today told the move would not have a detrimental effect on their credit rating.

Credit reference agency Experian said 160,000 customers who have had their cards withdrawn need not be concerned about ending up with a black mark against their name.

It said cancellation of a card by the issuer would be recorded on a credit report as a “settled” account, once any outstanding balance had been cleared.

Any lender checking the customer’s record in future would not see the name of the card issuer, only that the card had been settled.

This is the same as if the cardholder had cancelled the card himself.

James Jones at Experian said: ‘[Lenders] all make their own decisions on whether they want to grant credit or a credit card, based on credit reference agency information and other information provided by applicants.

“In fact, depending on the circumstances of the individual and policies of the lender, it could have a positive effect on your credit rating as a lender might view an application from someone with a lower number of cards as more attractive.”

However, Neil Munroe, external affairs director at credit reference agency Equifax, said the decision by egg was indicative of a general tightening of credit across the UK and consumers could still have problems applying for cards even if their records were perfect.

He added: “Knowing that a consumer will be able repay the credit extended is obviously the number one criteria.

“But I think consumers also need to recognise that lenders need to be able to make money as commercial organisations and, therefore, they will also look at customers from a profitability perspective.”

Nationwide’s Gold Credit Card and FlexAccount have been awarded a five star rating by financial research company Defaqto.

Defaqto’s reports use a benchmarking process on features and costs to compare and rate products across financial institutions and they found Nationwide’s Gold Credit Card and FlexAccount to be in the top ten per cent of products.

The Gold Credit Card offers zero per cent on balance transfers for ten months and zero per cent on purchases for three months, as well as promising no annual fees and commission free card use abroad.

Unlike most other card providers Nationwide also uses a positive system of payments to ensure the most expensive debt is paid off first when a payment to the account is made.

The FlexAccount, Nationwide’s current account, has been awarded a five star rating for the last four years and provides a competitive rate of interest on deposits and overdrafts, in addition to providing access to e-savings for a high rate of interest.

Many consumers in the UK have made use of credit cards that offer zero per cent balance transfers and purchase rates in order to manage their Christmas bills effectively.

According to Sainsbury’s Bank, zero per cent credit card deals can help most people to keep new year debt “under control” and enable them to clear bills quickly and easily.

Donald Macleod, Sainsbury’s Bank head of cards, claims that nearly two in three Brits expect to clear their Christmas debt by the end of the month, indicating that it is not a “massive problem” for most people.

“Bearing in mind that it’s the busiest time of the year, two thirds of people have their debt all cleared by the end of the month,” he stated. “I don’t view that as disastrous… In the main, it sounds like everybody’s got it pretty much under control.”

Sainsbury’s Bank estimates that 18 per cent of spending over the Christmas period in the UK was put on credit cards, with 61 per cent of consumers planning to pay off bills by the end of January, 15 per cent over two to three months, three per cent over seven to 12 months and one per cent over more than a year.

European Union consumers are set to benefit from lower penalty fees and interest rates under the EU consumer credit directive, which is expected to be approved by MEPs this week.

The new law aims to open the €800 billion (£600 billion) consumer credit market to cross-border competition.

Lenders will have to provide standardised information about annual percentage rates, for example, so that borrowers will find it simple to switch from a lender in their home country to one in any of the EU’s 26 member states.

Currently, cross-border agreements account for less than 1% of the market, however this figure could rise substantially under the new rules, because interest rates in the eurozone start as low as 6.3%, in Finland.

The EU directive will be applied to loans from €200 up to €75,000 and will not apply to mortgages, equity releases, charge cards or overdrafts.

BEUC, the consumer group that covers pan-European issues, has called the measures too narrow and is particularly concerned that provisions on early repayment are too vague and could therefore leave borrowers with no early repayment option.

According to the latest figures, outstanding consumer credit per person ranges from over €3,000 in the UK and Republic of Ireland to less than €100 in Slovenia.

THE METHODIST Church in Britain is launching a new credit card, but it will not be used to make purchases.
 
The ‘Buy Less Live More’ credit card is being distributed to act as a reminder to people to think twice before making a purchase.

The card is designed to be placed in a wallet or purse in front of other credit cards as part of a campaign to get people to curb their spending.

The Lent initiative has been welcomed by the Rev Michaela Youngson, Methodist Secretary for Pastoral Care and Spirituality. She said: “When we take time to think about the things we buy and why we buy them, it can help us to reconsider our priorities. I may well want to buy something, but does that mean that I need it?

But Buy Less: Live More isn’t about depriving yourself of those things you want; it’s about looking at life in a new way, trying different things and taking a few risks.

So as well as reducing your carbon footprint by getting off the consumer treadmill, you can live life in all its fullness.”

During Lent people who sign up will receive a daily email with 2 challenges or ideas for buying less and living more.
 

Millions of Britons are trapped in a cycle of debt, using their credit cards to fund Christmas purchases before they have even repaid last year’s spending, a survey claimed today.

Around one in 10 consumers - the equivalent of 4.4 million people - admit they are still repaying debt they ran up last December.

At the same time, 9% of people said it took them five months to clear their festive credit card bill, according to financial website

Chief executive, Sean Gardner, said: “Borrowing money is fine as long as you have a repayment plan.

“Unfortunately it appears millions of us do not. And with lenders getting tough, that is not a good position to be in. If you’ve not cleared the debts of Christmas past it is time to face up to the future.”

The figures are supported by ones from the Association of Business Recovery Professionals which found that one in 10 people will go further into debt in order to cover the cost of Christmas.

People planning to use credit for their festive expenses will borrow an average of £660 each, most of which will be put on credit cards, although some will be funded via overdrafts.

More than a quarter of these people plan to borrow money from friends and family members, while one in five will take out an additional loan.

Nick O’Reilly, vice-president of the association, said: “We are seeing record levels of insolvency in the UK and this is undoubtedly the result of people over-extending themselves.

“While it is tempting to spend more than you can afford, people should remember that the debt can last for years, not just for Christmas.”

A credit card provider has denied it is introducing a charge “by stealth”.Nat West credit card holders who opted to join its new rewards scheme are now being billed £3 a month, unless they spend £1000 a month on the card.

Some customers claim the bank gave inadequate warning and is introducing the charge at Christmas when people may not notice.

Nat West says full details were in the written terms people got before registering to join last summer.

Scheme replaced Airmiles

RBS/Nat West group is the second largest UK credit card provider and introduced the Your Points reward scheme last June.

It replaced Airmiles, with Nat West claiming Your Points would be more flexible to customers’ needs.

Your Points allows points accumulated each time a purchase in made using the card, to be exchanged for budget airline flights and holidays.

Cardholders were encouraged to phone up and register to join, but now some lower spending people have complained to BBC’s Money Box, that there was no warning about the charge over the telephone at registration time, and say they feel disappointed and misled.

They have just received leaflets telling them that from 1 December, people who do not spent £1000 a month on their card, will see a £3 a month charge automatically added to their card bill.