Watch out for credit card minimum payments

Since the various regulatory bodies in the UK clamped down on the amount that credit card companies could charge by way of fees, these card companies have been looking for new and inventive ways to make more money out of customers and make up for lost revenue.

In 2006 financial regulators in the UK ruled that credit card companies could only charge up to a maximum of twelve pounds for penalty fees, whereas before this many had been charging two or three times that amount. This resulted in huge financial losses for the credit card firms.

Since that time credit card companies have come up with a variety of ways to make more money from consumers, from adding annual fees and increasing foreign and cash transaction fees to charging customers for not using their card enough and even charging them for failing to provide them with change of address details.

And a recent report has revealed yet another method that these card companies are using in a bid to try and make more money from consumers and make up for lost profits resulting from capped credit card penalty fees.

The latest credit card tactic on the market seems to be to set the minimum repayment lower than the actually interest being charged each month, which means that those making the required minimum repayment on their credit cards will actually see their credit card balance rise even if they are not actually spending anything on the card.

One official from Moneysupermarket stated: 'A lot of providers have been narrowing the gap between the minimum payment and the interest charged, so it is important to check your statement and pay as much as you can.'

A Royal Bank of Scotland official stated: 'Each credit card statement carries a warning to customers that by choosing to make the minimum payment each month, it will take longer and cost more to pay off the card balance. Estimated interest depends entirely on the spending of the individual's account during each statement month.'

Tom Smith
17th June 2007

Related Articles:

• Making Credit Card Fees Easier To Understand
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• How To Avoid Paying Those Pesky Credit And Debit Card Fees
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