Ten ways for card companies to get more money
The Motley Fool reports that credit card lenders are likely to respond to the halving of their profits over the last five years. This has resulted from the increased number of rate tarts moving from balance transfer to balance transfer as well as the rise in bad debts. UK consumer debt rises by £1 million every four minutes, according to some statistics, and is now in excess of £1 trillion. The recent £12 cap imposed by the Office of Fair Trading on default charges has also hurt the lenders.
The Motley Fool points out that there are several strategies credit card lenders can use to recoup their money. These include the reintroduction of annual fees, higher fees for cash withdrawals and higher interest rates. With the Bank of England base rate now at 5 per cent, its highest level for some time, and expected to rise again in the New Year, interest rates for credit card purchases and cash withdrawals are likely to rise soon.
Other tactics that lenders might use include introducing more features that have to be paid for, such as identity fraud insurance, card protection insurance and payment protection insurance. There are also likely to be rises in balance transfer fees. These are now around 2.5 to 3 per cent of the balance transfers, most of these uncapped.
Cashback rates could also fall while the cost of taking money out abroad could rise. Interest free periods could also be reduced from the standard 45 to 59 days. Loyalty and reward programs could also be scaled down or cut altogether.