Low-risk credit card holders are facing fees, credit limit cuts or even account closure as credit companies seek to cut costs and increase revenue.

The move has been sparked by increasing bad debts and a limit on penalty fees imposed by regulators. The comparison site uSwitch says that up to 2.5 million card holders would face one or another of these sanctions. Most of these customers were those who either repaid their balance in full each month, or at least never paid less than the minimum monthly payment.

uSwitch went on to say, “Credit card providers are taking drastic action to manage bad debt.The question is whether providers are simply trying to reduce risk and indebtedness, or whether they are just trying to filter out less profitable customers”.

Retailers will be worried by the policies, as they monitor banks’ measures to reduce lending - shops are seeing the lowest spending by customers in three years, according to the British Retail Consortium.

Figures from APACS (the payments services association) show that out of 31 million card accounts in the UK, 21.4 million have their balances repaid in full each month.

Simeon Linstead of uSwitch said, “These customers are the least profitable for a credit card company to have on its books unless they withdraw cash, use their card overseas or get caught out by the order of repayments. They will not be contributing much to the £6.186 billion in interest made by the credit card industry last year.”

This entry was posted on Wednesday, May 14th, 2008 at 12:10 pm and is filed under Fees and Charges, General Credit Card News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.