Sneaky but inevitable

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Re: Sneaky but inevitable

Watch out for these underhand bank charges


Last Updated: 1:56am BST 04/09/2007


Credit card companies are protecting their profits with some insidious new fees, reports Faith Archer
Spare credit card began to be a burden after seven years unused in a wallet
Row over price of running bank account
Credit card companies are imposing sneaky new charges to protect profits after a consumer watchdog forced them to cut other fees.
Last year, the Office of Fair Trading (OFT) forced credit card providers to halve penalty fees, by setting a maximum charge of £12. Since then, consumer group Which? has found that the range of other fees and charges levied on credit cards has "notably increased".





Watch out for these underhand bank charges


Last Updated: 1:56am BST 04/09/2007


Credit card companies are protecting their profits with some insidious new fees, reports Faith Archer
Spare credit card began to be a burden after seven years unused in a wallet
Row over price of running bank account
Credit card companies are imposing sneaky new charges to protect profits after a consumer watchdog forced them to cut other fees.
Last year, the Office of Fair Trading (OFT) forced credit card providers to halve penalty fees, by setting a maximum charge of £12. Since then, consumer group Which? has found that the range of other fees and charges levied on credit cards has "notably increased".
Pick-pocketing: credit card companies are imposing
'sneaky' new chargesBy increasing annual percentage rates (APRs) and cash withdrawal rates alone, card companies have generated £815m, according to calculations by pricecomparison site uSwitch.com, almost triple the £300m they lost by halving penalty charges.
Martin Hocking, editor of Which? Money, said: "Credit card providers seem to be resorting to a raft of ingenious methods to recoup lost revenue following the OFT crackdown on penalty fees."
Which? found that several companies have reintroduced annual fees, so, for example, cardholders now pay £2 a month, or £24 a year, for the privilege of holding a Northern Rock Base Rate Tracker card or a Co-op Bank Platinum Visa credit card.
Meanwhile, in a one-off mailing, Lloyds TSB introduced a £35 annual fee for customers who had not used their card for a long time, while Barclaycard, Britain’s most popular credit card, is also considering charging up to 1m inactive customers between £12 and £24 a year for leaving their cards in their wallets.
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Customers who move house without notifying their card provider of the change of address could also end up with a £12 bill from Royal Bank of Scotland, NatWest and Mint. In addition, balance transfer fees imposed when switching a balance from one card to another in pursuit of a cheaper deal have been pushed up from a typical 2 per cent to 2.5 per cent or more, according to Which?.
Halifax, for example, has increased its balance transfer fee from 2 per cent to 3 per cent. A cardholder transferring a £5,000 balance would now have to pay £150, rather than £100, to do so.
Last June HSBC and First Direct changed the order in which debts are paid off, so payments now start by clearing cheaper balance transfers, rather than purchases charged at more expensive interest rates.
Nick White, of uSwitch.com, said: "In many ways, credit card providers have squeezed every last penny out of consumers to recover their lost millions, and have more than recovered it over the past year."
To avoid being stung, Mr Hocking advised cardholders to check the small print and to make sure they know what charges may apply.
He said: "The right card for you will depend on your needs, for example on how often you spend on your card and whether you have a balance to transfer."
Joanna O’Brien from money search engine Moneyfacts recommended both the Saga card for people aged over 50 and the Nationwide credit card as being "fairly upfront about charges".
Ms O’Brien said: "The Saga card charges a typical annual percentage rate of 16.9 per cent , but also pays interest if you have a credit balance. "Meanwhile Nationwide, with a typical APR of 17.9 per cent , uses an order of payments so that your most expensive debts are paid of first"
10 sneaky ways companies are clawing back money
Annual fees of up to £24 a year
Low-usage fees of up to £35 a year for customers who do not use their card regularly
Balance transfer fees when switching a debt, up from 2 per cent to 2.5 or 3 per cent
Lower minimum payments each month, driving up the interest paid and time taken to clear a balance
Changing the order of payments to clear the cheapest rather than the most expensive debt first
Calculating the annual percentage rate (APR) in different ways, where you do not pay off your balance in full each month
Fining customers £12 if they move house without informing their card provider
Issuing credit card cheques with interest rates of 20 per cent or more
Pushing up fees and interest charged on cash withdrawals to as much as 27.9 per cent interest and 3 per cent in fees
Treating gift vouchers as cash, and charging higher interest rates accordingly
Source: Which? Money at www.which.co.uk
For simple instructions on how to reclaim unfair bank charges, using template letters you can download, customise and send to your current account provider, go to www.telegraph.co.uk/bankcharges