Credit Card Fees In Overdrive
Credit card customers are feeling the pinch of the credit squeeze every bit as much as mortgage borrowers. Experts say that there have been 125 fee and interest rate increases on credit cards in only two months. In addition, it is harder even to get a credit card now, as there has been a rise in the number of rejections for credit card applications.
This comes at a time when more and more people in the UK need their plastic to help them make ends meet in difficult times. The increases also come with Christmas just around the corner, when people use their cards the most. Some use balance transfer options in the New Year to spread the load even further - well, it will cost them more to do that now.
Banks, building societies and other finance companies have increased fees to customers for cash withdrawals on 69 cards, and interest rates on cash withdrawals have been put up on 25 credit cards. Ten cards have seen an increase in balance transfer fees.
Another increase in charges has come on 18 cards for overseas transactions. Three cards have seen an increase in the interest charged on purchases made in the UK.
A study carried out by personal finance industry experts Moneyfacts.co.uk revealed that all these changes had occurred in just two months.
There is little doubt that these come as a direct result of the global credit crunch, with credit card providers taking a harder line on lending criteria, and the public is suffering as a consequence. The changes also show that finance companies are still looking for ways to make up the shortfall in their profits since a £12 cap was imposed on penalty charges for customers.
A separate study by personal finance website Moneyexpert.com showed that over three and a quarter million credit card applicants have been rejected by at least one credit company in the last six months. That figure represents around 9% of UK residents who have seen an application rejected in that time, yet in the six months prior to that rejections amounted to only 7.5%. It means that rejections are up by 17%.
Credit card analyst at Moneyfacts, Esther James, said: "It seems as if the credit crunch is beginning to cause credit card chaos. A hundred and twenty-five fee and rate increases inside two months is quite staggering. With the majority of increases staying away from the headline purchase these fee and rate increases are less in the public view, and often tucked away in lengthy terms and conditions. However, they can still make a substantial increase to the cost of using your card. With Christmas coming up, incomes will be stretched to the max with more people perhaps turning to their plastic for access to additional cash, only to get stung by still higher rates and fees."
Credit card borrowing rose by £310m in September, the biggest one-month rise for 18 months, taking it above £54bn. The increase came at a time when family finances are being squeezed by higher mortgage repayments and household bills
Published on November 8, 2007
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