Facelift on the cards

Barclaycard, the UK's oldest and biggest credit card issuer, is getting a facelift in an effort to stay ahead of its rivals and shake off its "poor value" tag.

The company, with 6.7 million customers, will announce today that it is spending "tens of millions of pounds" on a package of initiatives, including a 1 per cent interest rate cut, a refund of the annual fee for half of its customers, free extended warranty cover for people buying household appliances and a new platinum version of the card.

It is also dropping its 11-year-old Profiles loyalty scheme and launching a new one, Barclaycard Rewards. That means goodbye to the kettles, toasters and dinner sets - a mainstay of the catalogue for years - and hello to a more lifestyle-based programme, emphasising money off "essentials and the fun things in life".

The company claims the changes put it way ahead of the pack for value and warned cut-price rivals that they are "in for a fight". But competitors say the changes show Barclaycard is rattled by competition from new providers offering low rates and no annual fee.

Mark Austin, a spokesman for RBS Advanta,one of the new rivals, says: "It sounds like they are moving away from premium pricing to market average pricing. They've been forced to climb down by the weight of competition," said RBS Advanta, one of the new rivals.

"Consumers need to decide whether they want a card with a low interest rate or whether they want to buy a rag-bag collection of services," he added.

These are turbulent times for the market. Bank One, the second-largest card issuer in the US, has set up camp in Cardiff and is offering a standard and platinum card.

And last month fellow US-based issuer Capital One, which helped pioneer low introductory rates, scrapped its 9.9 introductory annual percentage rate and launched a card with what it claims is the UK's lowest flat rate - 11.9 APR. "The future is with simple flat-rate products. The number of introductory rates on offer is leading to confusion," it declared.

Barclaycard's initiative is a significant attempt to recover market share from new providers. It is cutting its interest rate by one percentage point, giving a new standard APR of 19.9 from May 1. The lower rates for bigger spenders remain unchanged - if you charge ?300 a month to your card it comes down to an APR of 18.9 and if you spend ?500-plus it is 16.9.

The company says its interest rates have fallen 3 per cent in the last six months, and the APR of 19.9 is the lowest in its 33-year history. But it is still way above Capital One's 11.9 APR and more than three times the most attractive introductory rate available - 5.9 APR until the end of June from Co-operative Bank.

Of more significance is the announcement that Barclaycard is effectively scrapping the annual fee for customers who spend ?2,000-plus per year with their card. They will have the ?10 fee refunded. Previously, the rebate threshold was ?5,000. Around half of all cardholders will benefit.

One of the most controversial aspects of Barclaycard's revamp is likely to be the introduction of the new loyalty scheme. For years, people have been able to save points and get something for the house or garden. But the company has decided to ditch virtually all household goods from its Rewards catalogue because it says they are "less popular with customers".

The real reason may be that they were becoming an embarrassment - many newspapers have mentioned the fact that you need to spend ?9,000 on your Barclaycard to get enough points for a toaster worth ?21.90.

However, you will still be able to get books, CDs, videos, CD-ROMs and wine as well as money off holidays, flights and leisure activities, and rebates on Ford cars.

New features include being able to use your points to get money off gas and electricity bills, though to benefit you have to switch to Barclaycard Energy, a joint venture with energy company Eastern Group. You can also get money off your phone bill, provided you sign up to Barclaycard's telephone service, and there are deals on travel insurance and AA cover.

As before, for every ?10 spent, cardholders will receive one point. All Profiles points held by customers will be converted into Reward points of equivalent value.

The Profiles scheme closes at the end of July and those people saving up for a particular item should notify the company. "We will do everything possible to get customers what they want," says managing director John Eaton.

With many families now forking out for several new household appliances each year, Barclaycard's offer of one year's free extended warranty cover on items such as televisions, fridges and hi-fi's will be welcome. The service applies to "most new household appliances costing more than ?25" but computers and garden equipment are excluded.

In the fickle world of credit cards, gold no longer has the cachet it once did - it's platinum that is all the rage now. Barclaycard's new platinum card, to be launched on April 20, will be available to "selected new customers" and offered as a free upgrade to all 405,000 Barclaycard Gold cardholders.

The company expects to issue 500,000 of the new cards by the end of the year. Its best perk is two years' free extended warranty. The APR rate is 17.9, falling to 14.9 for bigger spenders. The downside is that it is the only platinum card on the market with an annual fee - ?30. Other platinum card issuers include RBS Advanta (the only one offering an introductory rate - 6.9 APR until January 2000), Capital One, Bank One, MBNA and Associates.