Credit Card Annual Fees Coming Back?
NOVEMBER 13TH, 2006
| Credit Cards (introductory rate & period) |
Typical APR | Options |
| Virgin Credit Card 0% balance transfers, 13 months ( 2.9% balance transfer fee ) 0% purchases, 3 months |
15.9% (variable) |
 |
| Post Office Credit Card 0% balance transfers, 8 months ( 2.5% balance transfer fee ) 0% purchases, 3 months |
14.9% (variable) |
|
| Personal Loans | Typical APR | Options |
| Moneyback Bank Personal Loan | 5.7% | |
| Northern Rock Personal Loan | 5.8% | |
Credit card fees could be on the way back according to PricewarehouseCoopers (PWC).
A study has revealed that annual fees for credit cards could be reintroduced by providers.
Annual fees for credit cards disappeared in the late 90's as they became uncompetitive.
Providers are looking at measures to be able to recoup losses from new consumer protection having taken recent revenue hits from payment protection insurance (PPI) and a cap on default charges.
PWC believe that charges will amount to £35 to make up the losses to providers.
In total the PWC estimated that card providers will lose £1bn of revenue because of the new measures implemented by the Office of Fair Trading (OFT).
Issuers are already taking substantial hits due to rising bad debts and competition in the market place.
But with anything if there is charges are pushed down in one area they will be pushed up in another area in order to maintain profits.
"We are likely to see a 'waterbed effect', whereby charges pushed down in one area pop up somewhere else," said Richard Thompson, a partner at PWC.
We are now already beginning to see rises in interest rates as nineteen card issuers raised theirs throughout three months to September.
Every provider is now looking at way of getting their money back and by introducing annual fees is one way.
All that is needed is one of the big providers in Barclaycard, MBNA and Capital One and the rest will follow.
The OFT is already making warnings to providers over colluding to introduce annual fees.
Of course there are always ways around this...
The OFT's decision to cap default credit card charges was for the good of the public but as with anything the charges are just implemented in other areas or by decreasing the quality of the products.
At the end of the day the public still pay for it.
Of course if providers start to introduce fees consumers will move to other cards but if they are introduced across the board much like balance transfer fees have then consumers will have their hand forced.
With so much debt though on credit cards consumers may be forced to stump up the fee and accept it with not much choice.
Conclusion being now that annual fees are just around the corner it might be worth looking to do that final balance transfer and get that debt paid off.
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