Credit card fees and charges are like a waterbed – press down in one area and they pop up somewhere else. Make sure you know the sneaky tricks credit card companies use to make profit from their customers.
The government is listening to the general public, and the industry has introduced some positive changes over the past year or so, but card companies continue to pursue policies that are blatantly not in the interests of the cash-strapped consumer.
So what’s the good news? The rules on orders of repayments are changing. Sounds dull, but it could save you hundreds of pounds each year.
Under the old rules, most card providers would allocate any repayments you make on your credit card to your cheapest debt first, leaving the most expensive debt racking up interest. From the end of December they’ll have to pay off your priciest debt, such as cash withdrawals, first.
This is all great, but there are still plenty of improvements that could be made. Credit card interest rates are still sky high – on average they’re over 17%, while the Bank of England base rate has been 0.5% since last March. So card providers seem to be milking as much as they can from their unwitting cashcow – their loyal customers.
How are card companies profiting from customers?
- Increasing existing customers’ APRs – the advertised rate is only for new customers, so card providers can increase rates on your own card without it affecting the rate advertised in-branch or online.
- Different card providers use different methods to calculate interest, making it difficult to compare deals like-for-like.
- Many of the best credit card deals are reserved for people with a current account at the same bank, reducing consumer choice.
- Fees and interest rates for cash withdrawals are still extremely high. APRs approaching 30% are not unusual.
- Low monthly minimum repayments, encouraging those in debt to stay in debt.
- Poor-value credit card PPI is still being sold. Rebranding it as ‘lifestyle protection’ doesn’t mean it’s not PPI in all but name.
This is just a selection of ways in which consumers are being charged extra for using a credit card. Have you spotted any other sneaky wheezes? Let us know and we’ll investigate.