Credit card companies are fleecing their customers for up to £1billion a year by changing the small-print, such as withdrawing offers and shortening special offer periods, according to research conducted by uSwitch.com.
Customers are paying more for their credit cards in current economic conditions as companies try to increase profits by cutting interest-free periods, levying more balance transfer fees and upping the cost of withdrawing cash.
Credit cards offer a lifeline to many "credit hungry customers" who have little choice other than to use their plastic to make ends meet as other lines of credit dry up. Unsecured personal loans have dropped by £132million, but credit card
lending has moved in to fill the gap, increasing £130million in the same time.
Interest-free periods have been cut by 11 per cent in the last month, costing consumers an extra £3million in interest payments; almost a third of credit cards have cut the interest-free period from 56 to 50 days for new customers.
More than 90 per cent of credit cards now charge a fee for balance transfers, compared to just 29 per cent of companies in 2005, costing the 7.9 million consumers a year that get balance transfer credit cards
a total £412million. Fees have also soared 373 per cent, costing each customer an average £52.09, up from £11.02.
Interest rates on purchases have risen from 16.4 per cent to 17.7 per cent, costing £481million a year. Cash withdrawal fees have also increased, up 41 per cent to 29.97 per cent compared to 21.22 per cent in 2005, costing consumers £161million in interest each year.
Annual fees have also risen, by 82 per cent compared to last year, although the cards that offer rewards in return for an annual fee have declined in popularity. 'Life of balance' cards, which offer a fixed interest rate until the balance is paid off, have declined to an all time low of 2.8 per cent.
The overall number of credit cards available has also declined, falling from 145 to 116 from July 2007 to September 2008, making it more difficult for consumers to find the best credit card deals.
This "tweaking" of the terms and conditions has generated a potential £1billion for credit card companies during the last year, uSwitch.com's analysis has found, explaining that the current economic climate makes for perfect conditions in which to take advantage of customers who are strapped for cash and struggling to secure credit elsewhere.
"The credit card market is constantly evolving and even the savviest of consumers could be forgiven for not keeping pace with providers' tactical tweaks to terms and conditions." said Simeon Linstead, head of personal finance at uSwitch.com.
"It is vital that consumers give themselves the best possible chance of successfully repaying their debt in the tough times ahead by planning now to secure the best deals and products on the market. Consumers must remember, the more money you spend on fees and charges, the less you are paying off the actual debt."
© Fair Investment Company Ltd