If you thought you knew all the tricks your credit card provider has up its sleeve beware, as there are some new ones to watch out for.
Being a personal finance writer, I like to think that I know what I'm doing with my credit cards. I know that by timing my purchases I can get up to 59 days of interest free credit. I know that by using a cashback card I can effectively be paid to spend. And by the clever use of a 0% credit card for new purchases, I know that I can make a lot of interest for free -- and I have a shiny new iPod to prove it! (Expect to see more on this story in a forthcoming article).
Unfortunately, credit card providers keep on changing the rules. And why? To make more money of course!
According to a report released by accountants PricewaterhouseCoopers last year, rate tarts cost card issuers around £600m per year. (Rate tarts are credit card users that shift debt between 0% cards for balance transfers.) Bad debts are also rising, as borrowers struggle to keep up with card repayments.
What's more, the Office of Fair Trading (OFT) has forced providers to reduce their fines for late or missing payments from £20+ to £12. So, all in all, credit card issuers need to recoup around £1 billion in lost revenues!
So if you've taken note of the fourteen reasons we've already given to fear credit cards, take a look at some of the new ones created to separate us from our cash:
Charges for Moving Home
The Royal Bank of Scotland group, which includes NatWest and Mint, will now charge its credit cardholders £12 if they move home without informing their provider. The bank will give cardholders two months to inform them of their move -- in reality this means it will wait for two returned statements, at which point the £12 fee will be added to their account.
Verdict
Presumably if you set up a mail forwarding service you should be OK. And to be honest, in this time of identity fraud moving house without informing your credit card company is pretty stupid.
Low-use fee
Don't think you're safe if you're one of the many that always clears their credit card balances each month. Lloyds TSB has recently introduced a £35 low-usage fee for its credit card customers. Although it will not give a strict definition of the term low-usage, the bank did state that those who don't use their cards at all can definitely expect the charge. The bank has written to 50,000 of its customers to inform them of the charge, which will be levied on their accounts 30 days after receipt of the letter.
Verdict
In my opinion, there are better cards on the market with far less strict operating guidelines. So if you're a Lloyds TSB customer and you use your credit card for emergencies only, it could be well worth your while ditching that card and picking another instead.
In-Credit Fee
On a similar note, watch out if your credit card account has a positive balance. MBNA has written to its customers whose cards are in credit to inform them that they will be charged what it terms a £10 credit balance service fee.
I gave MBNA a ring to find out more and they assured me that this fee was a "one-off tidy-up" as they had apparently discovered that some of their customers were thousands of pounds in credit. MBNA told me they had offered to transfer this money back into customer accounts, should they not wish to spend it with the card, and only applied the charge to customers that had failed to reply. The provider then assured me that this was a one-off occurrence and would not happen again -- so I will be watching with interest to see if this charge is applied again next year. Please let us know if you are an MBNA customer that fell foul of this fee.
Widening Cash Advance Terms
And although most of us realise that withdrawing cash with a credit card is a no-no; interest is accrued from the minute you make the withdrawal, plus you'll be charged a cash advance fee of at least 2% on top. Did you realise that purchasing humble gift vouchers could be classed as the same thing?
Well, it will be if you have a Royal Bank of Scotland card. Purchase a gift voucher with your Mint or NatWest card and it will be charged as a cash substitute, and start accruing interest straight away. Other purchases classed as cash substitutes by the group include electronic money transfers, gift cards which can be used for purchases and pre-payment cards, such as Quidity.
What's more, make a purchase using your credit card via an online payment service such as Nochex and this could be classed as a cash advance, too. The situation becomes more complicated still when you realise that such transactions are not covered by Section 75 of the Consumer Credit Act, since you're not paying the retailer directly (you're paying Nochex, who pay the retailer). Aarrggh!
So how can you tell what you will and won't be charged for with your credit card? Well, the best thing to do is to check your terms and conditions (always be suspicious if your credit card provider sends you an updated version -- there may be a sneaky new catch). If, like most of us, you can't be bothered, then give your provider a ring. They should be more than happy to talk you through what you will and won't be charged for.
Of course, with over 75 million credit cards in the UK quite a few of us have more than one, so you'll need to remember the details for each one. If in doubt, try to stick to using your credit cards for straightforward purchases only -- if you wish to buy gift vouchers, play the lottery, gamble, buy foreign currency, wire money or buy a pre-pay card, use cash. And remember -- if you have a credit card you don't use, cancel it!
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