Lower charges could mean higher interest rates

02 June 2006
Lower charges for the late payment of credit card bills could mean higher interest rates for customers, a price comparison website has warned.

Uswitch.com has said that while a cap on charges might appear to be good news for consumers, lenders are likely to look for a means of offsetting lost revenue.

Barclaycard, Lloyds TSB and HSBC said recently that their credit card charges would be limited to £12, following recommendations from the Office of Fair Trading.

However, some lenders have already increased the rate of interest that they charge some customers.

"Unfortunately, this development comes as no surprise and will no doubt be reflected across the credit card industry in due course, as they are unlikely to write off £300 million a year generated by the old levels of default charges," said Nick White, head of personal finance at uSwitch.com.

"We predict that consumers could see the APR on their credit cards being raised by at least two per cent and the reintroduction of annual fees."

Consumer groups have been campaigning for some time for a cap on bank charges, which they claim are often above the legally fair limit.

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