Credit card firms' penalty charges questioned
(29 November 2005)

Credit card companies are under the microscope for increasing the penalty charges incurred by customers who make late payments or exceed their credit limits.

Such charges have increased by 38 per cent and 40 per cent respectively since 2002, with late payment costs now averaging £22.68 and the typical fee for breaking one's card limit being £22.79.

These fees mount up fast if you keep spending on your card when over your allotted limit. With a payday loan you know that you'll be making a one-off repayment of your loan plus a maximum of £25 per £100 spent – better value than exceeding your credit limit yet further at potentially £20-25 per transaction, not to mention interest.

Financial analysts Defaqto, who carried out the survey, noted that card providers have to cover their costs but queried the necessity of such inflated charges.

David Black, the firm's head of banking, said: "The provider does incur costs and time in dealing with delinquent transactions and justifiably seeks to pass these on to the errant consumer. However, many of these processes are automated and require little, if any, human involvement.

"It is questionable whether fees in the region of £20-plus are justified for relatively minimal effort."

A cash advance would keep you within clearly-defined limits and ensure that you have money in your pocket, meaning that you need not risk incurring more unwelcome charges from your credit card provider.



© Adfero Ltd