Barclaycard proposes monthly fee for low card usage

Posted in 'Personal Finance' by Richard Catlin

22 May 2007

It’s now exactly a year since the Office of Fair Trading ruled that some credit card charges were unlawfully high. In the meantime we have seen ‘late charges’ and ‘over limit charges’ being reduced from around £30 to £12. A number of high profile lenders have since admitted that this enforced reduction in charges will cost them tens of millions of pounds a year. Credit card companies are now looking to claw back some of this loss of income through the introduction of new charges. Whilst a fee for transferring a balance between credit cards has been pretty much the norm since 2004, with the majority of providers now charging 2-3% of the total transfer, recently we have seen a number of new charges starting to creep in. In February, Lloyds TSB introduced a ‘low usage’ fee of £35 per annum on its cardholding customers, in addition to a clause that requires customers who take advantage of their nine month 0% balance transfer deal to make a purchase of at least £100 within the first three months of having the card. In the same month, MBNA announced that it would charge any cardholder with a credit balance on their account an annual fee of £10 as a ‘tidying up’ exercise. The latest card company to announce a new type of charge is giant Barclaycard, with 10m cardholders, which on 23 May announced that it is to introduce a monthly fee of up to £2 for card accounts with low levels of usage. The charges are due to be introduced by the Autumn. There are fears that this will pave the way for fees to be introduced across the board to be applied to 'full payers' - those customers who have the audacity to take advantage of the interest free period offered by all cards, but which leaves card companies out of pocket as no interest is earned. Many lenders have increased their basic interest rates on purchases recently, whilst the APR charged on credit card cash withdrawals and foreign purchases has also soared recently. The typical interest rate for cash withdrawals is now a staggering 27%. Our Banking and Credit Card Survey 2006 found that 80% of respondents would switch credit card providers should they introduce an annual fee, increase their interest rate, or add further stealth charges. If your credit card provider has changed the deal for the worse over recent months, why not see if you could get a better deal elsewhere? Using our free Find a Lender service, you can see which lenders are matched to your personal credit score, identify cheaper cards and increase your chances of being accepted. Check your credit score for FREE and find credit card providers who want your business