Overdraft and card interest rates begin to come down

PEOPLE with overdrafts and credit card borrowings are gradually seeing rates ease as banks and building societies respond to the latest base rate cut.

Barclays Bank is cutting the interest rate on its flagship credit card, Barclaycard Visa. The annual percentage rate (APR) comes down from 28.5 to 24.9.

The rate on the Barclaycard MasterCard is coming down from 24.6 to 23.7 per cent. Rates for authorised overdrafts are also dropping, from 24.1 to 21.3 APR.

National Westminster has cut the rate on its Credit Zone overdraft from 23.3 to 19.9 APR. It is now at its lowest rate since January 1989. The rate on the bank's Access and Visa credit cards comes down from 26.8.to 25.4 APR. There are also interest rate reductions on the Visa Primary, MasterCard and Visa Gold cards.

Marks & Spencer is cutting the rate on its Chargecard credit card by 3 percentage points from 21 November. The new rate for people who pay by direct debit is 1.8 per cent a month, an APR of 23.8. Cardholders who do not pay by direct debit will pay 2 per cent a month, 26.8 APR.

This makes the M&S card one of the cheapest store cards, although John Lewis's card is still the best value in this market with a rate of 19.5 per cent. Neither M&S nor John Lewis accepts any other credit card in their shops.

It will be hard for other store card operators to withstand pressure for cuts in their rates, many of which are well over 30 per cent.

Mike Prentice, managing director, sales and marketing, at GE Capital Retailer Financial Services, which runs cards for the Burton Group - including Debenhams, Top Shop, Top Man and Principles - the House of Fraser and Laura Ashley, said: 'We intend to reduce our rates and we are discussing new rates with our retail partners.'

Savings rates are also being cut and Abbey National is reducing the rate on its standard current account for the second time in a month. It now pays just 0.75 per cent net of tax, on all balances. This brings Abbey into line with the rate on Barclays'interest bearing account, which has not changed with the latest base rate cut.

The banks' slim current account rates are inviting speculation that they will soon review the whole charging structure of current accounts, possibly even scrapping free banking for customers who retain small balances.

They deny that big changes are planned, however.