Making Credit Card Fees Easier To Understand

On average, UK credit card issuers make somewhere between £300 and £400 million a year in fees charged off of UK credit card users who have not fully understood how the credit card issuer has arranged the charging of their fees and who do not complain directly to the card issuer for any excessive or incorrect fee charges. In anyone’s language, this is a staggering amount of money!

This is probably why the Office of Fair Trading has now called time on this practice of unclear fee charging and has instructed all UK credit card issuers that henceforth they need to make it more clearer for their cardholders to fully understand what, and all, fees they should be expected to pay; or, more importantly, the amount of fees they should expect to pay if they do not comply with the general terms of their credit card agreement. Given this development on the part of the Office of Fair Trading, what fees and charges should you be expecting your UK credit card issuer to charge you for?

cash withdrawals

It has long been standard practice that UK credit card issuers charge cardholders for making cash withdrawals on their cards via an ATM machine. If you use your UK credit card to make cash withdrawals from an ATM, you need to double-check (a) if you’ll be required to pay interest from day 1 on the withdrawal amount, and if so how much; and (b) whether or not you’ll be charged an additional fee for withdrawing money via the ATM. You should also not that cash withdrawals fees apply equally to any cash withdrawal you make at an over-the-counter center (such as a bank teller).

introductory offers

To entice customers to move over to new UK credit card issuers, some UK credit card issuer offer “introductory zero percent” offer. What has caused some confusion here is

(a) the offer is null and void if you make a late payment on your minimum balance at any time during the introductory period;
(b) the offer only includes new debt incurred on the credit card during the promotional period;
(c) the offer only includes the amount of debt transferred.

In all of these cases, you should be checking to make sure you know exactly what fees you should be paying, if any. Just as importantly, however, is the fact that some UK credit card issuers will now charge you a fee to transfer you debt balance to a new UK credit card issuer, especially if you have not had an account with the card issuer for a lengthy period of time. Therefore, if you are considering transferring your credit card debt balance to a new UK credit card issuer, you need to make sure that you will not incur any unnecessary fees for doing this.

APR

Obviously UK credit card issuers need to make money, and historically this was done by charging UK credit cardholders APR on any outstanding debt beyond the statement payment date; for example, if you only made the minimum repayment each month. You need to be aware that this rate may change, and giving notice may be done by letter. So, if you are not used to reading the correspondence inside your credit card statement envelope, you should start to make yourself aware of this information because you may well find that there has been a change in the APR without your explicit knowledge.

interest free days

This was, and still remains, one of the biggest bonuses of having a credit card. You pay for the goods today via credit card, but provided you repay your credit balance in full, you can get up to 56 days credit! Not anymore! Most UK credit card issuers have drastically reduced this period to somewhere in the region of 45 days, so if you are walking around thinking you still get 56 days interest free credit with each credit card purchase, you’d best check.

In any event, if you are a UK credit card user you should be expecting to receive information from your card issuer explaining to you in much clearer terms than has previously been the case exactly how your UK credit card issuer will charge you fees and charges going forward.