Huge change for 10million credit card holders as major bank switches customers to Visa
MILLIONS of credit card customers at a major bank will have their cards switched to Visa over the next two years.
The payment merchant has snubbed its biggest rival, Mastercard, by clinching a new deal with Lloyds Banking Group.
It means 10million credit cards will be converted from Mastercard to Visa over the next two years.
This will include a combination of consumer and commercial credit cards.
All affected customers will be provided with new credit cards by the end of 2026.
Visa and Mastercard are the UK’s biggest payments firms, accounting for 95% of transactions on UK cards.
With this in mind, the shake-up won’t have a drastic effect on your new card acceptance.
However, materially, you’ll be issued a brand new Visa credit card with a new PIN.
What is Visa and Mastercard?
VISA and Mastercard are two of the largest and most widely recognized financial services corporations in the world.
They both facilitate electronic funds transfers throughout the world, primarily through credit, debit, and prepaid cards issued by various banks and financial institutions.
In essence, they act as a go-between between you, your bank and a retailer.
When you go to buy something, Visa or Mastercard checks with your card provider if a transaction should be accepted or declined, then confirms to the retailer that the payment can be made.
It then processes the payment between your card provider and the retailer.
While both companies offer similar services, the differences often lie in the specific benefits and features of the cards issued by different financial institutions under the Visa or Mastercard brand.
These benefits may include varying interest rates, rewards programs, fees, and additional perks.
The move means that Visa will be the leading payment provider for Lloyds Banking Group.
It means that customers who bank with any of the group’s subsidiaries, including Halifax, Bank of Scotland and MBNA could also be affected.
Marc Lien, Credit Cards Managing Director at Lloyds Banking Group said: “Our expanded partnership with Visa brings significant benefits to our customers, offering a seamless way to make payments, in addition to a range of upcoming innovative new products and services.
“We look forward to sharing the detail of these with customers in the future.”
Mandy Lamb, managing director, UK & Ireland at Visa, said: “We’re excited to take our long-standing partnership with Lloyds Banking Group to the next level, building on 40-years working together, delivering solutions that customers use and love.
“Together we’ll be enhancing the experience for debit card users, whilst launching innovative new products and services for credit card users too.”
Banks may switch their card networks based on new partnerships, strategic decisions, or changes in contract terms.
Therefore, the affiliations can change over time.
IN OTHER NEWS
The cost of borrowing money on a credit card has hit a record high, new figures reveal.
Interest rates on purchases reached 35.3%, on average, in June this year, according to Moneyfacts.
It’s the highest APR (annual percentage rate) since its electronic records began back in June 2006.
The APR indicates the cost of borrowing over a year, including the interest and any fees.
For instance, borrowing £1,000 at the average rate of 35.3% would cost you £1,173.49 in total.
Moneyfacts said that a combination of card withdrawals and interest rate rises have all contributed to this change.
The average rate at the same time last year was 31.2% and 26.7% in 2022.
The Bank of England (BoE) has left interest rates unchanged at a 16-year high of 5.25% since August last year.
The base rate is used by banks and lenders to set the rates they offer to customers, including loans and credit cards,
Although the rate has remained unchanged, it is far higher than the historic low of 0.1% in December 2021, pushing up borrowing costs.
The exact rate you get on a credit card depends on your circumstances though and shopping around can still get you a better deal than the average rates.
According to Moneyfacts the provider with the lowest purchase APR and purchase PA currently is from The Co-operative Bank’s 3-year fixed rate Visa at 8.9%.
At the other end of the scale, American Express‘ Platinum credit card has a whopping APR of 704.6% and PA of 31%.
Credit card need-to-knows
NOT using a credit card effectively can wreak havoc on your finances and your credit score.
If you don’t keep up with repayments or default on your debt, you are likely to get a black mark on your credit record, which could affect your ability to get a credit card, loan or mortgage in the future.
It’s important not to let yourself get sucked into overspending.
You should always clear the full balance as soon as possible.
If you have a poor credit score, don’t bank on being approved for a card or getting the 0% deal you’d hoped for.
Card providers only have to give the advertised rate to 51% of applicants, so you could end up paying more interest than you bargained for.
If you’ve got a poor credit record, you’re less likely to get the best rates.
And if you are looking for a new credit card, don’t apply for lots at once.
After your 0% period is up, lenders can charge upwards of 40% interest, so if you have not repaid the debt fully by then, try to move the debt onto another 0% deal.