MBNA plays a losing card with new fee

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The Independent Online

In return, the credit card holders, who currently pay no annual charge, will get either a lower annual percentage rate (APR), a 0 per cent deal on both purchases and balance transfers, or free cover such as travel insurance.

The move has baffled some observers. "This is pretty astounding," says Andrew Hagger from financial analyst Moneyfacts. "With the Office of Fair Trading already clamping down on card providers and their excessive penalty fees, you would have thought MBNA would keep its head down rather than introduce yet more charges."

The annual credit card fee has all but vanished over the past few years due to the intense competition between lenders. Only a handful now levy the fees, and these are usually at the top end of the market to pay for travel insurance or other benefits, in much the same way as a "packaged" current account operates. They include Citi Advantage Gold Visa (£25) and Lloyds TSB Premier High Value (£10).

However, most lenders steer clear of the fees for fear of either putting off potential customers or losing their existing ones.

MBNA is reticent about discussing its decision, saying the charge is a matter "between ourselves and customers".

"We've written to a small number of people to inform them an annual fee will be applied to their account from November," says spokesman Paul Lawler. Some of its other cardholders already pay annual fees, he adds.

However, the arrival of a charge, regardless of the compensating offers being made, should prompt the card holders to think hard about their deal.

There are low standard APR and 0 per cent deals galore in the market that don't carry an annual fee, says Mr Hagger at Moneyfacts.

"If you have money on your MBNA card, you could consider the Intelligent Finance credit card, which levies no balance transfer fee and offers 0 per cent interest for nine months."

Free cards with a standard low APR include Capital One's No Hassle at 6.9 per cent.

Meanwhile, it also emerged last week that Barclaycard is to raise its standard APR.

Millions of customers will see their rate rise from 13.9 to 14.9 from 14 November, although others viewed as a higher credit risk will pay as much as 27.9.

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