Abacus Daily Debt News

Credit cards becoming more expensive.

Credit card holders have been paying higher interest charges and fees since default charges on their cards were capped two years ago by the Office of Fair Trading.

In April 2006, the Office of Fair Trading (OFT) forced the banks to reduce nearly all their credit card default fees to £12. Previously, they had been charging up to £30 for a missed payment.

Now, financial information service Moneyfacts says the average purchase rate has risen from 14.9% to 16.4%.  The average rates for cash advances has risen from 18.1% to 24.3%.

“Taking cash out on credit cards has always been an expensive way of borrowing, particularly as interest is charged from day one,” said Michelle Slade of Moneyfacts.

“But with the 6.2% increase in the average rate for customers who are relying on cash advances to balance their monthly budget, it will make a bad situation even worse,” she added.

Juggling credit cards is not a debt management solution as the total debt continues to rise. Eventually making minimum payment becomes too difficult, followed by financial meltdown.

Enforcement Of Agreement

Most credit card companies have conformed with the industry’s agreement with the OFT two years ago.

However, the FSA recently had to enforce the limit on Clydesdale Financial Services, owned by Barclays, which provides store cards for a variety of retailers.  Their cards still have a default fee of £22.50.

As well as raising the basic charges and fees, some banks have charged more by introducing an annual fee, for using the card abroad or even for failing to use the card much at all.

Credit cards have always been one of the most expensive forms of credit. The is especially true if your rely on your credit card for cash advances. If you are experiencing debt management problems then please call us for free advice. We can offer a range of solutions that will help you manage your debts and see them reduced.