Credit card companies still trying to recoup lost profits

Since 2006, when financial regulators in the UK placed a ceiling limit on the amount that they could charge in terms of penalty fees, many credit card companies have suffered financially, losing a great deal of revenue as a result of these capped charges. Since this time these companies have been using a variety of tactics in order to try and recoup their financial losses, by charging extra in other areas. More and more credit card companies are using various strategies to boost profits because of the losses that have been incurred since the limit on charges was capped at twelve pounds.

Many customers have seen credit card interest rates rise steeply over the past year, making it increasingly difficult for them to try and clear their balances. The other strategies that have been used by credit card companies in order to try and claw back some of these lost profits includes increased foreign fees on credit cards, the introduction of annual fees, charges for errors such as failing to provide a change of address, increasing the type of transaction classed as cash transactions on which higher fees are charged, and more.

One industry official from MoneyExpert stated: 'Borrowing cash on your credit card is incredibly expensive and unless it's really necessary we'd urge people to think twice before doing it. The average APR was already expensive enough but card firms have pushed up rates by more than two percent in the last six months. There are so many cheaper ways of borrowing than 23.48%.'

Customers are urged to consider changing credit cards if they are being charged over the odds on their card. Those with credit cards should check and see whether their interest rate and cash transaction rate remains competitive, should assess whether annual fee is worth the benefits offered on the card, and should make sure that they read the small print and make themselves aware of additional charges that could be applied to the account.

Tom Smith
15th July 2007