Penalty charges for credit cards may be lower but companies are clawing their money back in ever more inventive ways.
Believe it or not, it used to be much easier to choose a credit card. But that all changed when, a year ago, the Office of Fair Trading announced that they would take a dim view of credit card companies charging more than £12 in penalty fees.They also indicated that they weren't too happy about penalty charges for current accounts, store cards and mortgages and would be commenting on them at some point in the future.
Not surprisingly credit-card companies weren't too happy, having been more used to charging as much as £25-£30 in penalty fees for late payments or exceeding credit limits. As a result they've set about finding ways of making up their losses by spreading costs among a wider group of customers.
According to the independent comparison website, Moneyfacts, here is a list of all the catches in the small print that you now need to check for:
- An increase in purchase interest rates.
- The introduction of duplicate statement fees -- Morgan Stanley and the Leeds Building Society now want £5 if you need a duplicate statement.
- An increase in balance transfer fees -- Abbey, MBNA and the Cheshire Building Society have all increased the fee from 2.5% to 3%.
- An increase in cash withdrawal interest rates and fees.
- A rise in foreign usage fees.
- The introduction of low usage charges -- Lloyds TSB recently introduced a 'fine' of £35 for people who don't use their credit cards frequently enough while MBNA intends to charge customers in credit £10 if they don't use their card during a 12 month period!
- The introduction of monthly fees.
- The introduction of address tracking charges.
- Increasing the number of interest-free days -- this is great for card holders who pay off their balance in full each month but for anyone carrying over a balance, they'll be paying more interest for the extra days.
- The amendment of the order of repayments.
All of which explains why the Office of Fair Trading decided to consider further their views on current account charges. They were due to comment in March but announced that they needed till the end of the year to make a decision about what banks should charge in penalty fees.
As Moneyfacts points out, all of these credit card changes make it even more important that you review the terms of your credit card regularly to ensure you are still getting the best possible deal. It may be a pain to read the small print when your provider sends through revised terms and conditions, but at least it will ensure that you know whether you credit card is costing you more.
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