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Credit card companies tighten squeeze on borrowers
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Even though our love affair with consumer credit might be going cold, we’re still lining credit card companies’ pockets with penalty charges. Find out how to reduce the amount you pay as lenders increase the pressure on their customers
Research by price comparison site uSwitch.com has revealed that the UK’s consumers have paid penalty fees worth an eye-watering £213m to credit card companies over the past 12 months. One cardholder in five has been penalised, with the average annual penalty totalling £37.20.
Louise Bond, finance spokesperson for uSwitch, criticised card issuers for turning up the heat on their borrowers. “People are already struggling to manage debts and keep their heads above water,” she said. “In the current climate these penalty charges are an additional cost that many consumers simply cannot afford.”
dealing with debt
Lenders bite back
Even though the Bank of England’s base rate has remained at a historical low of 0.5% since March, banks and other financial institutions are continuing to put the squeeze on their customers. As the credit crunch has bitten, several companies have ramped up their interest rates and other charges to support their balance sheets.
Figures released last week by the Bank of England indicated that consumer debt levels began to fall in July, for the first time since records began in 1993. Net lending to individuals fell by £600m during the month, including a £200m reduction in consumer credit, mainly comprising credit card debt.
However, even if you keep your card safely stashed in your purse or wallet, It seems that you can still get whacked with a penalty charge for doing nothing. The Times reports today that more credit card companies are considering “inactivity” fees to boost their profit margins, after consumer authorities ordered them to reduce the amount they charge for late payments.
For example, American Express has already introduced a £20 fee for any new customers who don’t use their Platinum cashback credit card for a year. Holders of Santander and Santander Zero credit cards also face a £10 “dormancy fee” if they go six months without using their plastic.
Apart from sneaky charges like these, holding on to credit cards you no longer use can also do nasty things to your credit rating, meaning you could be turned down or find it more difficult to obtain the best deals when you apply for another loan or mortgage.
By Tom Murphy, 8 September 2009
