Cheap credit has been performing a vanishing trick recently. Even when you think you have spotted this rare beast, you apply for the credit card or the loan, only to discover your credit rating isn't good enough, and the best rates disappear before your very eyes. You're left with either accepting a worse rate or shopping around and risking damaging your credit score.
And banks are breaking with recommendations in order to force us into this miserable choice.
The borrowing Catch 22
The culprit in all this is the trend towards pricing for risk. This means that credit card and loans companies can advertise competitive rates, but when you come to apply for the deal, you will be offered a rate that matches your credit score. Unless you have a perfect credit history (an increasingly rare thing at the moment) then you are likely to be offered a higher rate.
It means a number of people are accepting a far worse rate than they initially applied for, in a desperate hunt for to get the credit they need to help them out of a financial hole. Over the months or even years it takes for them to pay it back, this can cost hundreds of pounds more than they had expected.
The solution banks are meant to offer
However, The Daily Mail has reported on a little-known rule introduced by OFT's best practice guidelines and the Information Commissioner's Office that would put an end to this Catch 22. It's known as a 'quotation search'. This allows customers to hunt for a rate without actually applying for credit, which means they would be able to check the whole market without adding anything negative to their credit score.
Its investigation found that Nationwide was the only one of the high street banks to offer this option. In fact, RBS and HSBC even demand that you open a bank account with them before they offer you any credit at all. The others claimed the search wasn't as good as a full credit search (which the credit reference agencies deny).
Nationwide is now calling for all banks to follow their lead, and offer the quotation search. They say it's the only way that costumers can get the best deal. The question, therefore, is why the banks are dragging their heels.
Could it possibly be that it isn't in their best interests for customers to be able trawl the market and get the best deal? What do you think? Let us know in the comments.