Cardholders still paying out millions in charges

A recent survey that was conducted by moneysupermarket.com has shown that many credit card holders in the UK are continuing to pay penalty charges on their credit card accounts because of late repayments, missed payments, and for exceeding the credit limit.

Some think that this could, in part, be blamed on the rising interest rates, which have left many people on the financial brink because of rising repayments, and many have been unable to keep up with their repayments.

The survey involved interviewing over 2000 consumers in the UK, and according to the results around a quarter of credit card holders in the UK have paid these penalty fees in the past twelve months, enabling the credit card companies to enjoy an extra £230 million in profits collectively. This is despite the fact that penalty charged imposed by credit card companies had a ceiling limit placed on them last year after financial regulators stated that they were too high. Card companies can now longer charge more than £12 per charge, but are still managing to rake in the profits.

The result also showed that around one in eight consumers would prefer paying an annual fee or monthly charge on their credit card account as opposed to having to pay penalty charges.

One official from moneysupermarket stated: "If providers were thinking about introducing them they would have to offer cardholders much more than simply replacing penalty fees."

He also added:  "Penalty fees still affect a significant proportion of the population and providers are raking in some hefty cash, even after the Office of Fair Trading-imposed £12 cap." 

The research shows that credit card companies are still managing to take in a healthy profit from charges despite the cut in the amount that they can charge.

Tom Smith
2nd August 2007