Looming credit card fees likely to face resistance
Thursday 13th 2008f November 2008
Tod Ward
As bad debt soars, UK credit card
issuers are facing higher costs and lower revenues.To fight the ever-falling bottom line, credit
card issuers are looking to increase the frequency and level of credit card annual
fees; a decision that could be met with resistance from UK consumers.
Currently, roughly less than 10%
of UK cardholders are paying an annual fee.However, some card issuer, sometime in the near future will implement
annual fees across all of its products.When that happens, we should expect a domino-effect where the remainder
of the card issuers will follow suit.By
2012 we could see high annual fees for pretty much all of the credit card
products in the market.
Implementing an annual fee on
most credit cards in the market may cost some more than they think.If you hold more than one card, you would
then face paying annual fees on each of your cards.If you hold many cards but don't use them all
the time, the annual fee movement would be a costly time.
A recent survey from Auriemma
Consulting Group reveals that most UK cardholders place a much higher value on
cards without annual fees than those with a robust rewards program.This is a sure sign that Brits are pinching
every penny and then some. Annual fees
are primarily used by credit cards issuers to help finance rewards
programs.Cards that offer more enticing
rewards programs are usually accompanied by annual fees.For instance, the BMI Plus AMEX credit card offers
its users a generous Destination Miles scheme. Every pound spent on the card
will earn the user 2 destination miles.These miles can be redeemed for travel, hotels
etc...This card also carries a high
Annual Percentage Rate as well as an annual fee of £60.00.Currently, one of the lowest interest cards
is the Capital One Fixed Rate card (8.5% APR).This card offers no rewards or cashback facility; but is considered a
more attractive card in the current market. So there is a straight forward tradeoff between
annual fees and extra value (if that?s what you are looking for).
Raising current and imposing new
annual fees will no doubt be a tough sell to an already disheartened credit
card country.Credit card issuers know
this.They will be faced with the
onerous task of increasing and adding fees and keeping customers.To offset the looming annual fee mandate,
credit card issuers will no doubt come up with ways to sweeten the rewards
programs to offset the annual fees. Or simply by adding rewards programs to
cards that currently don't offer any.
Keep an eye on your current card(s):
Watch out for any increase in
fees (however small);Keep a look out for better credit card deals;
Only
choose a card with a rewards program is it offers something that is
important to you;
Keep an
eye on your other credit card fees - fees for cash advances and using the
card abroad could also go up in the near future.
Hot Cards:
Right now, there are cards that
still offer a great interest rate without charging annual fees for rewards.If you are looking for a straight up low
interest credit cards without the bells and whistles, you may want to look at:
Capital
One Bank: Fixed Rate Cards - No annual fee and an APR or 8.5% fixed for 44
months;
American
Express: Gold Credit Card - No annual fee and an APR of 12.9%; and
The Egg
Money Credit Card - No annual fee and a 12.9% APR
To learn more on these cards and
what they can do for you or if you have to transfer your balance to a cheaper
card, visit our service.
Thursday 13th 2008f November 2008
