Insurance: Penalty time for credit cards

For credit card firms and banks, Christmas can't come soon enough. There are about 41 million cards in use in Britain and plastic is flashed more than ever around now: the Credit Card Research Group expects shoppers to spend pounds 5,330 a second in December.

But the lenders' joy can be the borrowers' gloom. The percentage of people who "forget" to pay their bills or do so late also increases at Christmas.

Two fifths of credit card users pay their bills off in full each month but even some of them are likely to use the card's credit over Christmas.

When deciding to spread card repayments, it is important to know the terms and conditions of your particular card as there are fundamental differences between the 350 or so cards on offer.

Recent figures from Moneyfacts, the financial information group, highlight these variations. Lenders that offer low interest rates or do not levy an annual fee generally cover costs by charging for late payments. The highest are by firms such as First Direct, pounds 25 for a late payment, and Egg, pounds 20. Such firms attract custom with low interest - both Egg and First Direct have introductory rates of 4.9 per cent - but one or two late payments a year can offset any benefits. The anomaly is the Halifax: not only do its Visa customers face a pounds 20 late payment charge, they pay an annual pounds 10 fee and interest at 18.9 per cent APR.

Neil Walkling, from the Consumers' Association, advises against a card like Egg "if you're the sort of person who is not confident about paying things on time". As long as something is paid each month, these cards offer a good deal, particularly for those wanting to transfer balances and borrow on their card. But with Egg you only have 14 days to pay your bill, while other card issuers such as NatWest give you 25 days.

NatWest has recently stopped charging an annual fee. Its APR of 18.9 per cent is not the best offer for those who don't clear bills each month, but should you be late there is no fee for the first 20 days, then it is pounds 10. If nothing has been paid after 50 days, it is pounds 10 more and again after 80 days. Barclaycard does not charge for late paying, but has a pounds 10 annual fee.

With so many cards on offer it is possible to find one to suit your needs. Mr Walkling advises that you shop around if you tend to let your balance accrue interest, and move to a lender offering a low introductory rate. If your balance is not cleared at the end of that period, it is possible to move again. Or consider a personal loan if you have a large credit card balance, particularly if it is likely to take longer than six months to repay.

LATE PAYMENT CHARGES

Lender Annual Fee for late Enquiries

fee payment

American Express pounds 12 Nil 01273 620555

Bank of Scotland Nil pounds 20 01383 628444

Bank One Nil pounds 20 0800-389 6000

Barclaycard pounds 10 Nil 01604 234234

Egg Nil pounds 20 www.egg.com

First Direct Nil pounds 25 0800 242424

Halifax pounds 10 pounds 20 0800 233343

HSBC pounds 12 Nil 08705 353344

Lloyds TSB Nil pounds 10 Local branch

Lombard Direct Nil pounds 10 0800 215000

NatWest Nil pounds 10 01702 354040

Northern Rock Nil pounds 15 0845-600 1111

Orange (NatWest) pounds 12 Nil 0973 101200

RBS Advanta Nil pounds 12 0800 077770

Tesco Nil pounds 10 0800 406050