Costs for credit card customers keep going up : Credit Card Guide

Costs for credit card customers keep going up

A recent report has shown that costs for credit card customers in the UK are continuing to rise. Over the past two years credit card firms are said to have imposed a range of fee and price hikes, which have left households feeling the financial strain and have added to the financial woes and debt levels in the UK.

It was two years ago that the Office of Fair Trading imposed a £12 ceiling limit on penalty fees by credit card firms, and it is thought that the main reason behind the hikes is so that credit card firms can recoup some of the losses incurred as a result of this cap.

One industry official said: 'In April 2006 the average purchase rate on a credit card was 14.9%; today this has jumped to 16.4%. Previously, whereas only a select number of customers were being penalised, now all borrowers are paying the price.

For any customer who is paying their bill in full each month, the rate increase will have no impact, but with many households struggling with increasing financial pressures, those who only repay the minimum will be hardest hit. Anyone with a balance of £5,000 repaying just 2.5% per month will end up paying an additional £755 in interest from the 1.5% increase in purchase rates.'

She went on to state: 'The average interest rate for cash transactions have seen a marked increase from 18.1% to 24.3%. On top of this, the majority of institutions have increased cash advance charges. Previously the majority charged 2%, with a minimum of £2: now the majority charge 3%, with a minimum of £3.'

She added: 'Taking cash out on credit cards has always been an expensive way of borrowing, particularly as interest is charged from day one. But with the 6.2 percentage-point increase in the average rate, customers who are relying on cash advances to balance their monthly budget will find a bad situation is now even worse.'

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