Money Watch – Personal Finance Blog

The consumer rights company Which? has accused credit card companies of using “ingenious methods” for creating new charges so that they can recoup some money after last year’s decision by the Office of Fair Trading to limit penalty fees to £12.

To show just how “innovative” the credit card companies can be, Which? have highlighted 10 (yep, count them, 10) tricks to watch out for:

1. Annual Fees – these seem to have died out a few years back, but are starting to reappear gradually.
2. Low Usage Fees – what a cheek! Charging you for not wanting to get into debt! Lloyd TSB, we’re looking at you!
3. Balance Transfer Fees – no more rate tarting for you – balance transfer fees are rising and 0% deals have all but disappeared.
4. Lower Minimum Payments – if you’re only paying the minimum amount, on a large balance (or on any balance really), then it will take you ages to get rid of the debt, and you’ll pay loads more in interest than if you pay the debt off quickly.
5. Order of Payments -yet another trick which relies on people misunderstanding the way credit cards work. The”cheapest” part of the debt is paid off first, meaning the more expensive debt sits around gaining even more interest.
6. Interest Calculation – the lowest APR does not necessarily mean the lowest interest, as there’s currently no standard calculation for APR.
7. Miscellaneous Charges – get charged up to £12 for failing to notify the company of a change of address. Easy money. For them.
8. Credit Card Cheques – Just don’t use them. The interest rates are horrendous.
9. Withdrawing Cash – some providers have increased interest rates and fees for cash withdrawals
10. Gift Vouchers – some cards treat gift voucher purchases as cash withdrawals, which attract a higher interest rate.

The banks have responded by saying that they are being much more upfront now about their charges and the feature of the cards.

The advice as ever is to try to check all of the small print before signing up for a credit card, and think about how you’re going to use it, to see if it fits your usage profile.