MBNA criticised over credit cash

Credit card firm MBNA has recently came under attack for encouraging its borrowers to withdraw more cash on their credit cards so they can splash out over the Christmas period.

MBNA the world’s second largest credit card provider has been sending letters to what it describes as its ‘best’ customers, announcing it has raised their credit limits

One letter passed to Seek4finance reads:

‘As one of our best customers we’ve recently increased your credit limit to £10,900. This means you can withdraw more cash this Christmas to really splash out on yourself and your family.’

It then continues: Simply by visiting the nearest cash machine displaying either the MasterCard or Visa Logo you can get access to cash whenever you need it.’

But these withdrawals would cost a typical customer 25.9 per cent interest charged from the day the money was taken.

The letter has been heavily criticised by debt charities. Chris Tapp, a director of Credit Action, says: ‘Particularly in the current climate, it is breathtaking that MBNA is actively encouraging customers to take cash out on their credit cards.

“This is an extremely expensive way of accessing money and often indicates that a customer is in a poor financial situation because they don’t have any alternatives.

It is also completely unethical to raise credit limits without consulting the customer first.’

Withdrawing cash on credit card is hugely expensive because you get charged on the day of withdrawal. You then pay interest on the higher amount.

As well as its own brand, MBNA provides credit cards for Virgin Money, Alliance & Leicester, football and rugby clubs and charities. It refuses to acknowledge how many similar letters it has sent out.

A spokesman says: ‘We make offers to customers and they are entirely free to decide whether they take up that offer. We are a responsible lender and would only increase someone’s credit limit if it was warranted.’