The credit card industry has been largely unaffected by the credit crisis, according to MoneyFacts, but this is now changing as lenders amend their rates and increase their charges more fervently as funding becomes harder to come by and risky customers seem less attractive in light of sub prime losses.
Since April, MoneyFacts has noticed a marked increase in rates and charges attached to credit cards.
"Until recently the credit card
market had seemed to continue along as it always has." said Michelle Slade, analyst at Moneyfacts.co.uk. "Credit card companies usually tend to shy away from increasing the purchase rate as this is the headline rate all consumers will look at when selecting a new card. Many card companies have preferred instead to increase the rates and charges that many consumers may take little notice of when selecting a card."
There have been 19 increases in purchase interest rates, an average of about two per cent, 14 interest rate increases for cash withdrawals with increases as high as seven per cent, eight credit card providers have increased their withdrawal fee, and five have increased the balance transfer credit card
fee, while others have increased Payment Protection Insurance premiums and the annual fee.
One credit card, the American Express Nectar AmEx has increased its purchase interest rate by three per cent – this would mean an additional £1,073 of interest payments for a customer with £3,000 on the card.
Ms Slade said: "Some of the recent changes could perhaps be justified by lenders' increased risk and cost control as a result of the credit crunch. Others, such as reducing the minimum repayment, could just be seen as squeezing more profit from those who are already feeling the pinch.
"Although it may appear to be a slight relief to consumers struggling to keep up with existing monthly repayments, it has a much more negative effect in the long run. With reports showing more and more consumers using their credit cards to keep their heads above water, these increases will be a big blow. "
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