Related Credit Card Article

"Annual Fees May Be Coming for Credit Card Holders"

By admin | July 26th, 2009 | Featured

With the government clamp down on the credit card industry in the last months, credit card companies are poised to charge an annual fee for the cards in order to recoup some of the losses that they have incurred.

The Internet bank EGG recently released a new credit card that had an annual fee of £12. It gave indications that other banks are set to follow suit.

Peter Harrison of the price comparison site Moneysupermarket.com, said that right now Egg is the only credit card company to issue a card with an annual fee, but this is likely just the “tip of the iceberg.”

Harrison went on to say “We are likely to see more providers follow suit as they try to claw back profitability following the launch of the Consumer Protection White Paper last week.”

In this white paper, the government placed a ban on credit card companies raising customer limits on the account and sending out unsolicited credit cards by mail. The companies have also been banned from increasing the interest rates on the current balances on existing credit card debt.

“On top of a hike in cash withdrawal fees, foreign usage fees and balance transfer fees, monthly fees would be “just rubbing salt in the wound”, says Andrew Hagger of Moneynet.co.uk, a personal finance website. “The introduction of a monthly credit card fee by Egg could potentially start an unwelcome trend.”

Haggar continued, “The majority of customers in the UK have never paid a fee for their plastic and will be dismayed if the move by Egg is followed by other credit card providers. Ever since credit card penalty fees were capped at £12 back in 2006 we have seen a hike in cash withdrawal fees, foreign usage fees and balance transfer fees – monthly fees on top of this will just be rubbing salt into the wound.”

There were others, though, that welcomed such an annual rate on the Egg credit card because they say with the many other advantages credit card companies offer to consumers, such as a cashback of 1% on purchases up to a limit of £200 per year.

Such rewards will more than pay for the annual fee. However, a typical annual interest rate of 17.8% will be far greater than any dividends if the customers do not pay their credit card balance in full each month. The new Egg credit card also comes with a guarantee of 8.9% on balance transfers as long as customers are paying off the balance.

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ccording to the chief executive of Egg, Bert Pijls, “Egg Money is the only credit card to combine 1 per cent cashback, discounts, protection and a low life of balance transfer rate. To offer this level and variety of benefits to customers there is a small fee of £1 a month; good value for what we believe is the best all round card on the market.”

Check out your credit card to see if there are new annual charges associated with it and then weigh the costs to determine if it will be good for you.

Tags: annual fees, credit card annual fee, Credit Cards

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