Credit Card Fees. The Credit Card Companies Strike Back
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
Credit Card Fees: How Companies Are Responding
Overview
The popularity of credit cards is skyrocketing, with many opting for plastic over cash. Experts even suggest that carrying cash might soon become obsolete. In 2005, debit card spending surpassed cash transactions on the High Street, according to Precious Plastic 2007, a comprehensive analysis of the UK consumer credit market by PricewaterhouseCoopers (PwC).
While convenient, this trend comes with its own costs. PwC's research highlights how credit card companies are grappling with reduced profits, especially under scrutiny from regulatory bodies like the Office of Fair Trading and the Financial Services Authority.
Is Reduced Card Charges Really Beneficial?
You might think that stringent regulations on credit card charges would be beneficial, yet the impact isn't straightforward. While consumer protection rules have cut fees for exceeding limits or missing payments, potentially costing firms £1 billion annually, this leads to the 'waterbed effect'?"where reduced fees in one area appear as increased charges elsewhere.
Credit card companies will recoup these losses, so it's crucial to stay informed about emerging fees and learn how to avoid them.
How Lenders Might Offset Losses
Annual Fees
Watch your statements for any mention of annual fees reinstated by your provider, as this is a common tactic to recover lost revenue.Rising Interest Rates
As the Bank of England has increased interest rates, expect higher rates across purchases, cash advances, and balance transfers. Cash advances typically come with the steepest rates, so it's wise to avoid using your credit card for these transactions.Be cautious of tiered APRs, where different balances have different rates, such as 13.9% for below £3,000 and 15.9% above. Additionally, if you're late in making payments, penalty APRs may apply.
Increased Balance-Transfer Fees
Expect balance-transfer fees to rise, with current rates between 2% and 3%. Since few firms cap these fees, transferring large balances can become costly.Shortened Interest-Free Periods
As credit card users frequently switch cards for the best deals, companies may reduce the duration of interest-free periods, affecting those who pay off their debts monthly.Stricter Over-Limit Penalties
Lenders might enforce stricter penalties, such as higher rates or reduced credit limits, if you exceed your credit limit.Be a Smart Credit Card User
To minimize penalties, always be aware of the terms when you sign up for a credit card and monitor any changes diligently. The less you owe and the more you pay off each month, the better your financial health.
Next Steps
Finding the right credit card offer can help you avoid costly surprises. We compare various providers to ensure you get a deal that suits your spending habits.
Explore Credit Card Offers:
- [0% Balance Transfer Rate Credit Cards](http://www.moneyexpert.com/Search/Introductory-Balance-Transfer-Credit-Cards.aspx)- [0% Purchase Rate Credit Cards](http://www.moneyexpert.com/Search/Introductory-Purchase-Rate-Credit-Cards.aspx)
- [0% Balance Transfer & Purchase Rate Credit Cards](http://www.moneyexpert.com/Search/Introductory-Balance-Transfer-Purchase-Rate-Credit-Cards.aspx)
Choose wisely and enjoy the benefits of smart credit card usage!
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