One in eight credit card companies charge fees

According to recent research around one in every eight credit card companies now has operated a credit card that charges annual fees to customers for the privilege of using the card.

Consumers are advised to look out for these fees, which are generally around £20 a year, and to look at taking out a different credit card if they wish to avoid the expense of having to pay an annual fee in order to benefit from the convenience and flexibility of a credit card.

Last year saw financial regulatory bodies in the UK slash the amount that credit card companies could charge by way of penalty fees. In the past credit card companies had been charging typical fees of between twenty and thirty pounds for late payment or exceeding the credit limit. However, in 2006 financial regulators in the UK reduced this fee to a maximum of £12 per charge – resulting in huge financial losses for many credit card companies that had previously been charging far more per fee than this.

As a result of this a number of credit card issuers have looked for other ways to try and recoup these financial losses. This includes increased fees and charges for cash transactions and for using the card abroad, and wider pool of transactions now classed as cash transaction that are charged at a higher rate, and by introducing various fees, including annual fees on many of the credit cards.

One official from Moneyexpert, which carried out the research, stated: 'The rising tide of bad debt hitting banks and other credit card firms is forcing providers to tighten their belts and think of new ways to make money. We thought we'd seen the end of annual fees on credit cards, but we think there could be a return sooner rather than later. Credit card companies will be under pressure to improve profits and reduce bad debts, and that could mean finding customers who are prepared to pay for credit.'

Tom Smith
4th June 2007

More Information:

• Credit Card Charges
  Credit cards appear to have only one cost to a user – the interest charged on purchases, but there are a whole raft of hidden charges just lurking below the surface. So, some cards offer an annual payment option in return for certain benefits. What is the best option, and in what circumstance
• Making Credit Card Fees Easier To Understand
  On average, UK credit card issuers make somewhere between £300 and £400 million a year in fees charged off of UK credit card users who have not fully understood how the credit card issuer has arranged the charging of their fees and who do not complain directly to the card issuer for any excessive or incorrect fee charges. In anyone’s language, this is a staggering amount of money!
• How To Avoid Paying Those Pesky Credit And Debit Card Fees
  It seems that UK credit and debit card providers would like to charge us each and every time we use our plastic cards these days. While the charge for each separate individual transaction may not seem like much, add them up over a month or two and suddenly the amount has some value. So, how do we avoid having to pay pesky fees to UK credit and debit card providers?