£1bn in new fees predicted
UK credit card holders could soon be facing an extra £1bn a year in fees and charges according to a new report, as card issuers look to recoup revenue lost following rule changes to late payment charges.
The report, from PricewaterhouseCoopers and entitled Precious Plastic 2007, says that profit margins on credit cards have been slashed since the introduction of a £12 cap on penalty charges, and that an investigation into payment protection insurance may further reduce the profitability if rules are tightened up.
Add rapidly rising levels of bad debt into the mix, and it seems almost certain that issuing banks will begin to look at news ways to claw back this lost revenue, which is estimated to amount to around £35 per credit card account.
A return of the annual fee, long since banished from most card offerings, is already underway, with issuers such as the Co-operative Bank reintroducing them to some of the cards in their range. Another possibility is an across the board raising of interest rates, withan extra 2% on top of each card’s APR reckoned to be the amount needed to restore the lost profits.
Whichever way the industry decides to go, one thing can probably be relied on - the customers are never likely to gain at the expense of the banks for long.