March 29, 2006

By Peter Kenny

The last seven days has brought some very good news for credit card holders in the UK and the good times are set to continue. In the next few days the Office of Fair Trading (OFT) will be taking to task the credit card companies and their excessive penalty charges.

Penalty charges are an extremely lucrative market for credit card companies, with penalties reaching as high as £25 for bounced cheques, late payments or unauthorised overdrafts. The OFT will demand that penalty charges should be capped at around £15 per item.

Last year the total cost of penalty charges came to £1 billion. With the OFT intervention it is estimated these costs will drop by up to 40% to £600 million.

Just last week it was judged that credit card companies are liable for credit card purchases made abroad or through the internet. It was decided to overrule a previous decision made two years ago that any purchase made abroad were not covered by a credit card guarantee.

With all this good news for consumers there is unfortunately some bad news looming. Credit card companies will want to make up for these losses and we will no doubt start to see higher interest charges creeping in. Over the last twelve months we have seen extra charges for transferring you balance to a new credit card now we are seeing those charges increase. Standard balance transfer fees are around 2%, however, more and more companies are increasing these to 2.5 per cent with no maximum fee.

For more information on the recent court rulings for credit card use abroad click here