Credit Card costs rise

Whilst it seemed like a good idea 2 years ago for The Office of Fair Trading (OFT) to get banks to cap their credit card charges at £12, it has now emerged that customers who have them and use credit cards are actually paying more overall anyway.

The default charge is issued to those consumers who miss a payment, have a late payment or go over their agreed spending limit.

The banks had to get their money back somehow, and so what appears to have happened is that their APR rates have actually increased instead to cover the gap that was left in the lenders bank balance.

APR rates that used to be around the 14.9% mark are more about the 16.4% mark instead. Even worse is cash advances on credit cards. Always the most expensive way of lending money, as interest is charged from the day of withdrawal as opposed to the end of the month. The fee charged on these credit card withdrawals is revealed to have increased by a massive 6% to around 24%.

Other ways banks and building societies have reduced the impact of the capped charge is to introduce annual fees and increase fees when using cards abroad.

Credit cards can be very useful things to have, but at the same time very dangerous too - so always know the rates and when to use and not use your card. In todays market of credit culture staying informed is the best way to steer clear of excessive credit card debt.