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Credit Card Charges
Recent months have seen thousands of people making claims against their banks for unfair charges of as much as £39, which critics say are being disguised as fees for “services”, such as sending a letter to inform them that they’re overdrawn.
As the media have become involved, documenting the high profile cases, the public has finally begun to look at just how much their credit cards are costing them – if you’re not careful you can end up paying out hundreds of pounds in fines and fees.
The Office of Fair Trading said last year that credit card charges were unfair, and should be capped at £12. In a bid to recover their losses – resulting from both the lower fees and money claimed back by customers, banks have introduced a host of new charges.
The charges
People know and expect cash withdrawal fees, but card providers have recently increased these charges; they rose from an average of 1.9 per cent (or a minimum £2.20), to the current average of 2.3 per cent (minimum £2.50).
To add to this, a number of individual banks and card providers have thought up creative new ways of squeezing out even more profits.
Change of address
The Royal bank of Scotland (www.rbs.co.uk) has just announced a new charge for not informing them of a change of address. If you move house and a second statement is returned to them you’ll be charged £12.
Low usage
Lloyds TSB (www.lloydstsb.co.uk) has decided that customers who don’t use their credit cards enough should be fined for their lack of spending. While they haven’t yet said what quantifies “low usage”, those who don’t use their cards at all will certainly face the £35 charge and have been instructed to start spending, pay the fine or go elsewhere.
Cash for statements
Almost all banks now charge for reprinting statements, but different policies mean that what you pay could vary widely depending on who you bank with. For example, HSBC (www.hsbc.co.uk) charges £1 per page, Halifax (www.halifax.co.uk) and Alliance & Leicester £5 per statement and Barclays (www.barclays.co.uk) and Natwest (www.natwest.co.uk) £5 per request. So, six year’s worth of statements – how far back you can reclaim your bank charges – could cost you hundreds of pounds with some banks, or just £5 with others.
But if you are requesting statements in order to reclaim charges, be aware that you don’t need to get statements – your bank should provide a record of charges, or you can make a Data Protection Act request for the information, which will cost you £10.
The new cash
Taking money out from the cash point using your credit card is a cash advance. Most people know that doing this incurs a fee, but what many don’t know is that cash advances also carry a higher rate of interest, and importantly, that the amount you take out will be the last thing you pay off from your balance. So you’ll be paying that higher rate right up until you clear your card’s debt.
To add to this, banks are now increasing their range of products considered to be “cash advances”. According to the Royal Bank of Scotland, gift vouchers, gift cards, gambling, foreign currency, traveller’s cheques, electronic money transfers or finance payments such as mortgage or loan payments are all cash advances, carrying the higher rate of 24.9 per cent interest, compared to the lower purchase rate of 16.9 per cent.
Positive balance charges
Credit card company MBNA has written to its customers warning them that they will be charged if they leave positive balances on their accounts. They have been offered the options of donating their positive balance to charity, spending it, or moving it to a current account – otherwise they will be fined £10, or the amount to bring the balance to zero if it’s less than £10.
The end of free banking?
Despite ever-increasing profits, banks across the high street are hinting that fee-free bank accounts could soon be a thing of the past and we could be forced to pay for the “maintenance” of our current accounts.
However, recent years have seen the emergence of an increasingly aware consumer and continuing to shop around for the best value bank accounts and credit cards means that banks will have to work much harder to keep their existing customers and to win new ones.
So as new deals crop up all the time, keep on comparing them to make sure that you have the best one. But remember, if you have a substantial debt that you want to take with you, you’ll have to pay a transfer fee, so look for a card with a good life-of-balance deal instead.
If you’re not carrying a bulky balance around with you, then you should go for a card with cash back and zero per cent on purchases, but look out for any new or unusual charges that could make that glitzy offer a little less shiny.
