Credit card companies are charging their customers more in interest rates and charges than they were 12 months ago, despite the base rate falling 4.5 per cent since April 2008, according to research from Which?.
Despite calls from the Government for companies not to put additional pressure on households when they are at their most vulnerable, the consumer watchdog has discovered that credit card
providers have found a number of methods for squeezing more cash out of their customers.
Which? found that in the last 12 months, 28 providers of popular credit cards have either increased their interest rates or other charges, reduced the number of days a customer has to pay their credit card bill, or reduced the duration of interest-free periods.
Credit card interest rates are now 0.5 per cent higher on average, but some of the biggest credit card companies
have increased their rates by as much as four per cent – almost as much as the base rate has fallen in the same time.
The number of credit card providers offering cashback credit cards
has fallen, with just eight companies offering them compared to more than twice that number two years ago, while others have reduced the amount of cashback they pay. Balance transfer credit cards
have also been affected, in some cases the introductory rate has risen from zero per cent to almost five per cent, while the fee for transferring has increased significantly.
Cash withdrawal fees have added to the increasing expense of credit cards, with some providers doubling the amount they charge their customers for withdrawing cash using their credit cards.
Other companies have introduced more sneaky tactics, such as retaining an existing headline rate to entice new credit card customers, while raising the interest rates of existing customers.
"At a time when we’re all feeling the pinch, it’s hugely disappointing that credit card companies are choosing to put the squeeze on borrowers more than ever," said Martyn Hocking, editor of Which? Money. "With interest rates so low, it is time for credit card providers to enter the real world. They need to make credit cheaper and their charges more transparent and fair, rather than making it harder than ever for people to make ends meet and pay back their debts."
Commenting on the Which? report, Liberal Democrat Treasury spokesperson, Lord Oakeshott, said that banks must be more fair to their customers, especially those banks which are now partially owned by the taxpayer.
"These taxpayer-owned banks must stop spanking their credit card customers. Paying these extortionate interest rates in the high teens destroys your financial health just like 50 cigarettes a day or 50 drinks a week," he said. "The FSA should warn these banks and all financial advisors not to sell any pension or savings product to anyone paying these sky-high interest rates. It's blatant misselling if you get people borrowing at 17% to invest for an expected return of only 7%."
Which? recommends that credit card customers keep an eye on their credit card accounts to check for rising interest rates, charges and other factors, and to switch credit cards if they are unsatisfied with the service they are getting. Compare credit cards »
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