Credit card providers 'impose stealth charges'
12/09/2006
Consumers have been warned that credit card providers are imposing stealth charges in order to make up money lost on credit card fees, according to a report today.
Research states that the credit card industry was making around £679 million in penalty charges per year – a figure which has dropped to £379 million since the Office of Fair Trading ruled that these charges are unfair.
As a consequence, uSwitch has warned consumers that credit card providers are using "stealth charges" in order to recoup the £300 million they previously made in credit card fees.
Theses charges come in the form of increased balance transfer fees, increased cash interest rates and through changing the order of repayments.
Nick White, head of personal finance at uSwitch, comments: "While the OFT's decision to force credit card providers to reduce default charges was undoubtedly a victory for the nation’s 30.6 million credit card customers, the card issuers' responses elsewhere have not been so welcome."
Mr White added he is unsurprised that developments have already occurred across the industry with Barclaycard raising its interest rates for certain customers after it dropped its charges.
He continued that consumers need to be "more alert when choosing a credit card" and should not get "carried away with the headline grabbing rate".
Under the OFT's ruling any default charges set above £12 are deemed unfair and will be challenged by the authority unless there are "exceptional" factors in play.
Research states that the credit card industry was making around £679 million in penalty charges per year – a figure which has dropped to £379 million since the Office of Fair Trading ruled that these charges are unfair.
As a consequence, uSwitch has warned consumers that credit card providers are using "stealth charges" in order to recoup the £300 million they previously made in credit card fees.
Theses charges come in the form of increased balance transfer fees, increased cash interest rates and through changing the order of repayments.
Nick White, head of personal finance at uSwitch, comments: "While the OFT's decision to force credit card providers to reduce default charges was undoubtedly a victory for the nation’s 30.6 million credit card customers, the card issuers' responses elsewhere have not been so welcome."
Mr White added he is unsurprised that developments have already occurred across the industry with Barclaycard raising its interest rates for certain customers after it dropped its charges.
He continued that consumers need to be "more alert when choosing a credit card" and should not get "carried away with the headline grabbing rate".
Under the OFT's ruling any default charges set above £12 are deemed unfair and will be challenged by the authority unless there are "exceptional" factors in play.
