Switch credit cards and avoid those fees

November 17, 2006

With the news this week that credit card companies and banks may be looking to start charging an annual fee to make up for lost revenues, consumers have the opportunity to look for better deals and never before has it been easier to switch.

If the warning from Price Waterhouse Cooper does come true the competitiveness of the credit card market should ensure that there are plenty of cards on offer that do not charge an annual fee.

Credit card companies and banks have been making plenty of profits and quite frankly any moves made to charge an annual fee would just show up as greed. The fact that card providers class default charges as a revenue is unethical. By introducing annual fees, card companies and banks will be penalizing all cardholders.

The loss of revenue has been blamed primarily on the decision by the Office of Fair Trading (OFT) to force banks to reduce their default fees to a maximum of £12 per transaction. Just about all the credit card providers have now agreed to the OFT's decision and reduced their charges. However, should banks and credit card companies have been looking at these default charges as a source of income in the first place?

The fee of £12 for having an unauthorised overdraft or late payment is still too high and completely overpriced for the effort and work involved by the credit card provider. It should also be noted that the OFt "recommended" a maximum amount of £12 per transaction, the vast majority of card providers now charge £12 with a very small number charging just under, which is really just for marketing.

PWC also warn of credit card companies having to increase interest rates by an average of 2 per cent to make up the shortfall in revenue. Already this year we have seen banks and credit card companies increase the standard variable APR quite dramatically. Credit cards are already one of the most expensive forms of credit available to us.

If any card providers announce they plan to start charging an annual fee, consumers should vote with their feet and immediately switch credit cards. There are literally hundreds of credit cards on offer.