David Prosser: Amex sends a warning

Outlook Here's a worrying straw in the wind from the credit card industry. American Express is to introduce a £20 charge for cardholders who haven't used their plastic during the previous 12 months (known as dormant accounts in the business). It's not unprecedented – Lloyds and Santander have similar fees – but it's another sign that all is not well in the credit card sector.

Rising bad debts and increasing fraud are taking their toll on lenders. A lucrative source of income was also cut off a couple of years ago when regulators effectively capped the charges that may be levied on credit card accounts if payments are missed on spending limits exceeded. It's also the case that more people are trying not to spend on plastic. So while lenders are still having to set aside capital to cover everyone's account, revenues are diminishing.

Amex's charge will be easy enough to avoid. Just use your card occasionally, even for the smallest of transactions. Or cut it up and switch to a different lender. Still, this is a warning sign: the days when credit card providers were battling for borrowers' business are long gone. The total cost of borrowing, despite a record low in Bank of England base rates, is only heading one way.

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