Money News
| Typical APR Variable | Max Int Free | ||
|---|---|---|---|
|
14.9% | 56 days |  |
|
|
14.9% | 56 days | |
|
14.9% | 56 days | |
|
14.9% | 56 days | |
|
15.9% | 56 days | |
| * Based on Lowest Standard Rates and is not a full search of the whole market | |||
The law of unintended consequences is hard at work in the UK credit card market as credit card providers move the goalposts to make up for losing out on penalty fees. In the last two weeks alone, six credit card providers have made major changes to some or all of their cards. These changes range from interest rate increases, by as much as 10% (on cash transactions), to shortening of interest free deals.
With fees and interest rates increasing and providers becoming more 'creative' with their terms and conditions, it is more and more important to understand fully any credit card deal before signing up. Look closely at the small print of many terms and conditions and you'll also see cash withdrawal fees and foreign usage charges are rising, while some have introduced a requirement to make purchases as part of a 0% balance transfer deal.
Every credit card issuer except Britannia Building Society now charges a balance transfer fee on 0% deals to new customers, something which until 18 months ago was virtually unheard off. These fees have also been getting more expensive with 3% now almost standard and some card issuers removing a previous cap on the fee.
Michelle Slade, of Moneyfacts comments, "Withdrawing cash from your credit card is a very expensive way to replenish your wallet, as you're not just paying a high interest rate but also a withdrawal fee. For example GE Money has increased its cash rate to 25.517% and raised its withdrawal fee by 0.5%, while Lloyds TSB's cash withdrawal rate has risen to 27.948%, an increase in some cases of up to 10.406%.
"Lloyds TSB has added covenants to its 0% for nine month deal. On its Gold or Platinum MasterCard, to qualify for the full nine months 0% you are required to make a purchase of £100 on your card within the first three months. Because the cheapest debt, i.e. the balance transfer, will be repaid first when your monthly repayment is made, your purchases will be immediately subject to interest, charged at 17.9% or 15.9% respectively and you will never be able to take advantage of an interest-free balance transfer deal.
"I wonder if the OFT really knew or appreciated the consequences of their default fee capping actions, as now many more borrowers are being hit by higher rates and fees, whilst those who abuse their credit facility are let off more lightly. Let's hope they learn from the credit card market when deciding how to tackle overdraft fees."
15 July 2008 © Moneyextra.com
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