Credit Card Issuers May Bring Back Annual Fees

Currently consumers in the UK can enjoy the benefit of a wide choice of credit cards from reputable companies, and with many of these cards there is no annual fee to worry about, which means that consumers can enjoy saving on the cost of having to pay yet another fee for the privilege of using the credit card. However, recent reports have suggested that many credit card issuers in the UK are now looking at bringing in the annual fee and charging consumers a set amount each year.

The reason for this train of thought amongst credit card issuers, according to reports, is the crackdown on penalty charges that have been introduced by the UK’s Office of Fair Trading. The crackdown on these charges means that consumers that are late or miss monthly repayments on their credit card balance cannot be charged more than twelve pounds in the way of penalty for the missed payment. These Office of Fair Trading directives are expected to costs the credit card industry nearly one billion pounds in lost income.

Richard Thompson, who is a partner at PriceWaterhouseCoopers, stated: With fierce competition and rising bad debts already hitting issuers, it's hard to see how the banks will absorb 1 billion pounds of lost revenues. We are likely to see a waterbed effect, whereby charges pushed down in one area pop up somewhere else." Thompson added that many credit card companies could end up charging up to thirty five pounds a year as an annual fee in a bid to try and recoup some of the revenue lost through the crackdown on penalty charges.

The other concern is that credit card companies could collude with one another in relation to the enforcement of annual fees, and the Office of Fair Trading intends to keep a close eye on this, with one spokesperson stated: "It is OK if providers look independently at what other firms are charging and adjust their prices accordingly but if we find any evidence of collusion that will be very serious indeed".

Alisdair Milton
1st December 2006

More Information:

• Credit Card Charges
  Credit cards appear to have only one cost to a user – the interest charged on purchases, but there are a whole raft of hidden charges just lurking below the surface. So, some cards offer an annual payment option in return for certain benefits. What is the best option, and in what circumstance
• 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!
• How To Avoid Paying Those Pesky Credit And Debit Card Fees
  It seems that UK credit and debit card providers would like to charge us each and every time we use our plastic cards these days. While the charge for each separate individual transaction may not seem like much, add them up over a month or two and suddenly the amount has some value. So, how do we avoid having to pay pesky fees to UK credit and debit card providers?
  

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