UK Credit Cardholders Face Murky Fee Structure Future
In their attempt to claw-back some of the estimated £1 billion in lost revenue following the investigation by the Office of Fair Trading on late payment fees, which resulted in UK credit card issuers introducing a limit of £12, UK credit card issuers now look set to introduce a range of new fees and charges which will surely result in UK credit cardholders facing a murky and dangerous fee structure future that will almost certainly lead to confusion.
 Heading the list of complaints in respect of the latest round of moves by UK credit card issuers is the problems that are almost certainly going to occur with regard to the development of a two-tier card fee structure. Research by PricewaterhouseCoopers reveals that UK credit card issuers are on the verge of re-introducing annual fees for card members.
However, indirectly this is almost certainly going to have more of an effect on those UK credit cardholders who are currently struggling to make payments on their credit cards, as this sector of the UK credit card market will be less likely to be in a position to move their outstanding credit card debts to another UK credit card provider. As such, those UK credit cardholders who are already struggling to repay their credit card debt will be stung with higher fees on the credit card debt they have. Conversely, those UK credit cardholders who have no problems paying off their credit card bills each month are unlikely to find themselves having to pay any annual fees, as they will likely be able to shop around and look for a UK credit card provider offering a no annual fee introductory membership offer.
Nevertheless, the contemplated counter move to recoup their lost earnings by UK credit card issuers are unlikely to be limited to the re-introduction of annual fees. A new report published by Money Expert is warning UK credit cardholders that the cost of making cash withdrawals on their credit cards could likely result in them having to pay an average APR of 21.27%. Sean Gardner, chief executive of Money Expert says that UK credit card issuers can justify such a high APR on the grounds that “Card firms argue that credit cards are for purchases rather than for withdrawing cash, so they charge a premium for those who use them for cash.”
While this may certainly give peace of mind to the UK credit card issuers, it is unlikely to help UK credit cardholders. Today, not only are UK credit cardholders faced with having to understand the different applications of effectively tiered interest on the different types of credit card transactions they make, they now have the added burden of trying to understand how all of these different types of tiered interest rates are going to apply to their outstanding credit card debt as well.
But the truth be known: they’re most likely not. Faced with such a prospect UK credit cardholders will likely stop checking their monthly statements and just pay the amount they see in the minimum repayment box. Which may be just the result UK credit card issuers are looking for.
Alisdair Milton
3rd November 2006
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