Credit card customers paying price for defaulters

According to a recent report all credit card customers are paying the price for the high levels of credit card defaults, and this is through increased interest rates, fees, and charges.

In the past credit card companies charged hefty fees to cardholders who missed repayments or made late repayments, as well as to those that exceeded their credit limit.

However, two years ago the Office of Fair Trading ruled that the maximum amount per charge that credit card companies could charge would be £12, which was a far cry from the £25 or £30 that many had been charging.

As a result of the crackdown on default charges officials claim that all credit card customers are now having to pay the price. Figures show that since the crackdown on penalty charges the average rate of interest on a credit card has jumped from 14.9% to 16.4%.

One official stated: “Previously, whereas only a select number of customers were being penalised, now all borrowers are paying the price.” It is those that pay the minimum repayment each month that are being hardest hit, as those that repay the balance in full each month do not have to pay interest anyway.

There are many other fees and charges that have gone up for credit card users according to the report, and this includes cash withdrawal fees, cash transaction fees, foreign transaction fees, and transfer fees on balance transfer cards.

The industry official went on to state: “Taking cash out on credit cards has always been an expensive way of borrowing, particularly as interest is charged from day one. But with the 6.2 percent increase in the average rate, for customers who are relying on cash advances to balance their monthly budget it will make a bad situation even worse.”