Consumers paying a fortune on credit card cash withdrawals

According to the price comparison website uswitch, many consumers in the UK are paying far more than they actually realize in terms of interest on cash withdrawals that they make on their credit cards.

Officials from uswitch state that the amount charged in interest for credit card cash withdrawals has rocketed since two years ago, yet many consumers continue to make these withdrawals and incur these fees without even realizing how much they are paying.

In 2005 the UK's Department of Trade and Industry made it easier for consumers to compare credit cards. However, since these changes credit card cash withdrawal charges have rocketed by around 30%, and between them credit card consumers making cash withdrawals are paying around £145 billion in interest each year, which is up from around £112 billion nearly two years ago.

Credit card companies and banks have been increasing charges in many areas in order to make up for losses resulting from last year's decision by financial regulators that credit card penalty fees has to be capped at £12. Stealthily pushing up the fees and interest attached to cash withdrawals on credit cards is one of the ways in which the industry is trying to recoup some of this revenue so it seems.

One uswitch official stated: 'Consumers could be forgiven for thinking that they are being treated as the banking industry’s personal ATM. It's easy to see why the major banks continue to announce record profits, which this year alone totalled in excess of £40 billion, when the welfare of their customers continues to take a backseat to shareholder profits.

We challenge the OFT to investigate whether these rates amount to 'usury' or extortionate lending.

Tom Smith
3rd April 2007