Watch out for these underhand bank charges

Watch out for these underhand bank charges

Last Updated: 1:56am BST 04/09/2007

Credit card companies are protecting their profits with some insidious new
fees, reports Faith Archer

Telegraph

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Credit card companies are imposing sneaky new charges to protect profits
after a consumer watchdog forced them to cut other fees.

Last year, the Office of Fair Trading (OFT) forced credit card providers
to halve penalty fees, by setting a maximum charge of £12. Since then,
consumer group Which? has found that the range of other fees and charges
levied on credit cards has "notably increased". Man taking money out of
pocket for story about bank charges Pick-pocketing: credit card companies
are imposing 'sneaky' new charges

By increasing annual percentage rates (APRs) and cash withdrawal rates
alone, card companies have generated £815m, according to calculations by
pricecomparison site uSwitch.com, almost triple the £300m they lost by
halving penalty charges.

Martin Hocking, editor of Which? Money, said: "Credit card providers seem
to be resorting to a raft of ingenious methods to recoup lost revenue
following the OFT crackdown on penalty fees."

Which? found that several companies have reintroduced annual fees, so, for
example, cardholders now pay £2 a month, or £24 a year, for the privilege
of holding a Northern Rock Base Rate Tracker card or a Co-op Bank Platinum
Visa credit card.

Meanwhile, in a one-off mailing, Lloyds TSB introduced a £35 annual fee
for customers who had not used their card for a long time, while
Barclaycard, Britain’s most popular credit card, is also considering
charging up to 1m inactive customers between £12 and £24 a year for
leaving their cards in their wallets.

Customers who move house without notifying their card provider of the
change of address could also end up with a £12 bill from Royal Bank of
Scotland, NatWest and Mint. In addition, balance transfer fees imposed
when switching a balance from one card to another in pursuit of a cheaper
deal have been pushed up from a typical 2 per cent to 2.5 per cent or
more, according to Which?.

Halifax, for example, has increased its balance transfer fee from 2 per
cent to 3 per cent. A cardholder transferring a £5,000 balance would now
have to pay £150, rather than £100, to do so.

Last June HSBC and First Direct changed the order in which debts are paid
off, so payments now start by clearing cheaper balance transfers, rather
than purchases charged at more expensive interest rates.

Nick White, of uSwitch.com, said: "In many ways, credit card providers
have squeezed every last penny out of consumers to recover their lost
millions, and have more than recovered it over the past year."

To avoid being stung, Mr Hocking advised cardholders to check the small
print and to make sure they know what charges may apply.

He said: "The right card for you will depend on your needs, for example on
how often you spend on your card and whether you have a balance to
transfer."

Joanna O’Brien from money search engine Moneyfacts recommended both the
Saga card for people aged over 50 and the Nationwide credit card as being
"fairly upfront about charges".

Ms O’Brien said: "The Saga card charges a typical annual percentage rate
of 16.9 per cent , but also pays interest if you have a credit balance.
"Meanwhile Nationwide, with a typical APR of 17.9 per cent , uses an order
of payments so that your most expensive debts are paid of first"

10 sneaky ways companies are clawing back money

# Annual fees of up to £24 a year

# Low-usage fees of up to £35 a year for customers who do not use their
card regularly

# Balance transfer fees when switching a debt, up from 2 per cent to 2.5
or 3 per cent

# Lower minimum payments each month, driving up the interest paid and time
taken to clear a balance

# Changing the order of payments to clear the cheapest rather than the
most expensive debt first

# Calculating the annual percentage rate (APR) in different ways, where
you do not pay off your balance in full each month

# Fining customers £12 if they move house without informing their card
provider

# Issuing credit card cheques with interest rates of 20 per cent or more

# Pushing up fees and interest charged on cash withdrawals to as much as
27.9 per cent interest and 3 per cent in fees

# Treating gift vouchers as cash, and charging higher interest rates
accordingly

Source: Which? Money at www.which.co.uk

# For simple instructions on how to reclaim unfair bank charges, using
template letters you can download, customise and send to your current
account provider, go to www.telegraph.co.uk/bankcharges
.

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