Inflexible friends
Banks. Sorry but it’s time to make another complaint. This time about charges on credit cards. Last year the Office of Fair Trading forced credit card companies to cut the penalty on customers who were late with a monthly payment or exceeded their credit limit. Charges of around £25 were cut to £12. But it was a Pyrrhic victory. Since that ruling the taking-money-off-customers-without-them-noticing departments have been working overtime on a range of new and higher charges. Here are some.
Low usage fee. Lloyds TSB, MBNA, and Barclaycard have all threatened low users with a fee of between £10 and £35. That could make it expensive to take on a card for a special offer such as enhanced cashback or an interest free period and then stop using it. Solution: cancel unused cards.
Annual fees. Some banks are introducing a fee just for having the card. Northern Rock and the Co-op both charge £2 a month - £24 a year – on at least one card. Solution: switch to another card.
Moving charge. Royal Bank of Scotland fines customers £12 if they move and fail to tell it. Once the second statement is returned by Royal Mail the charge is applied to the account. Solution: inform banks when you move.
Cash surcharge. Taking out cash on a credit card is always expensive. More interest is charged – Lloyds TSB has just raised it further. There is usually a fee as well. Royal Bank of Scotland has increased that from 2% of the money withdrawn to 2.5% and Capital One from 2.5% to 3%. Solution: Never use a credit card to withdraw cash.
Reduced minimum payments. Some cards, such as Barclaycard and Marks & Spencer, have cut the minimum payment taken each month. That stretches out the debt over many more years and costs customers far more in interest. Solution: cut up your card and fix your repayment at the old level until the debt is cleared.
Order of payments. More and more cards are using what you pay each month to reduce the cheapest debt first leaving the most expensive debt hanging around for as long as possible. Solution: switch to one that doesn’t, like Nationwide which uses your payment to reduce the most expensive debt first.
Just six of the ten increased credit card charges identified over the last year by the consumer organisation Which? Of course a commercial organisation can charge what it likes for a service it offers. But the charges on financial products are hard to spot – and competition can only work if you understand them. And take action.
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