Credit card companies reduced fees
Oct 02, 2006
While the Office of Fair Trading may have successfully managed to reduce the level of default fees charged to credit card holders, many banks have responded by finding other ways to increase their revenue, new research has found.
A report from financial information site Moneyfacts found that in the last three months, 19 card providers have increased interest rates for new customers, some by as much as 12.1 per cent. Although the Bank of England's base rate rise in August was a contributing factor, the large size of the rise meant that there were other factors at play, the report stated.
Rising bad debts and the lost revenue from default fees had left many credit card providers no choice but to look for alternative sources of income, including raising card interest rates, it claimed.
Moneyfacts commented that withdrawing cash using a credit card can be the most expensive way to replenish your wallet, as you're paying a high interest rate as well as a withdrawal fee. Increasing numbers of consumers moved back from credit card borrowing in august, figures from the British Bankers Association show, with underlying credit card borrowing falling by £0.4 billion, while borrowing on unsecured loans and overdrafts rose by £0.2 billion.
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