Card providers sneak in new penalties for missed payments

Many of the UK's largest credit-card providers have begun cancelling borrowers' interest-free offer periods if they fail to make a repayment, landing customers with months of unexpected interest charges.

Abbey, Egg and Capital One are among a clutch of providers to follow the lead taken by Barclaycard last year, adding new clauses into their terms and conditions that allow them to withdraw introductory offer periods if their clients do not make every single monthly payment on time.

Barclaycard was first to introduce such penalties last summer. However, it allows customers one lapse.

But the many other credit-card companies now adopting the idea have drafted small print allowing them to withdraw the offer after just one lapse. Analysts are also angry that the latest providers to adopt the penalty have introduced it without explicitly warning customers, as Barclaycard did.

The development follows similar moves by providers in recent months to try to recoup some of the revenues lost in the competitive UK credit-card market. With providers now forced to offer 0 per cent interest offers for at least six or nine months to secure new business, companies have been struggling to make a profit from new clients. As a result, several providers have begun charging additional fees and tightening up on their lending criteria.

Stuart Glendinning, marketing director at the analyst Moneysupermarket, said the move was no surprise, with US companies having introduced similar penalties a long time ago. "In the US, some companies will revoke the 0 per cent offer, even if you fail to make a payment on a bill that has nothing to do with your credit card - like your water or gas bill," he said. "I wouldn't be at all surprised if many more UK providers begin withdrawing 0 per cent deals for those who miss their credit-card repayments."

Sainsbury's Bank was criticised yesterday for raising its credit-card interest rates by more than 3 percentage points for some existing customers. Many borrowers will now pay 18.95 per cent interest rather than 15.94 per cent. Andrew Hagger of analyst Moneyfacts said: "An increase of this magnitude will be a shock to many cardholders and certainly hard to swallow, bearing in mind that the base rate is 4.75 per cent and has not increased since August."