Backdoor rises in the cost of cards

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The Independent Online

Credit card users beware: a growing band of providers have stealthily begun to slip in extra charges.

In the past eight weeks, more than 10 card firms have introduced a succession of changes, reports price-comparison service uSwitch. These include removing the cap from balance-transfer fees, raising those fees themselves and changing the order of repayments so that interest builds up.

Meanwhile, there have been upward movements in the standard purchase annual percentage rate (APR), in the charges for using a credit card for ATM withdrawals and in cash- advance fees.

It all goes back to April, when the Office of Fair Trading (OFT) told companies to cut the charges levied for late payment to £12. Since the ruling, most banks and card issuers have fallen into line, and when the watchdog wound up its investigation earlier this month, it said "no further intervention is warranted".

However, while this has all been welcome news for the UK's 30.6 million credit card holders, the industry has spent the summer cranking up other fees and charges in an attempt to recover the £300m a year it is expected to lose.

"It appears that no matter what the Office of Fair Trading does to prevent banks ripping off their customers with unfair charges, banks will fight back by finding a way to recoup lost revenue," warns Nick White of uSwitch.

Last week, the Co-operative began writing to cardholders to inform them that, from 1 November, it will be levying a £2 monthly fee on two cards: the bank's own Base Rate Tracker and the Northern Rock Base Rate Tracker, which is provided by the Co-op.

A spokesman for the Co-op says "several external factors around the UK credit card market" were behind its charges.

"There have been some economic changes, such as bad debt, which have increased the risk for banks [when lending to consumers]," he adds.

Elsewhere, the Royal Bank of Scotland has increased its cash-advance fee from 2 per cent to 2.5 per cent and removed the balance-transfer cap, while MBNA has raised its balance-transfer and cash fees to 3 per cent for existing customers.

HSBC has changed the order of repayments so money is allocated to items with the lowest level of interest first, leaving items charged at higher rates, such as cash advances and new purchases, to accrue interest.

Nationwide building society, meanwhile, has increased its standard-purchase APRs by 1 per cent.

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