Credit Cards Online Information

Consumers should brace themselves for the return of annual credit card fees, according to the 'Precious Plastic 2006' report from accountants PricewaterhouseCoopers (PwC).

The reintroduction of the fee, largely abandoned in the 1990s as the credit card market became fiercely competitive, would form part of a fightback by banks and card lenders hit by a costly 'treble whammy'.

First, bad debts are rising as consumers overstretch themselves and default on what they owe; bankruptcies and individual voluntary arrangements are on the up.

Second, 'rate tart' customers, who hop from one cheap credit card to the next, continue to cost the industry money.

It is estimated, PwC reports, that consumers who switch their outstanding credit balances between 0 per cent card deals to avoid paying any interest have hit the sector's pockets to the tune of some pounds 600m this year. That has been despite the widespread introduction of a balance transfer fee of 2 per cent.

Third, a number of regulatory bodies have been looking at some of the practices of the lending industry " payment protection insurance (PPI) on loans, for example, and penalty fees for late payment " and this will probably force banks to levy lower charges in the future.

In this environment, annual fees are likely to emerge as a way for lenders to claw back some money, PwC forecasts.

'Credit card providers are coming under increasing pressure from competition and mounting regulatory scrutiny,' said Richard Thompson, a PwC partner and author of the report.

'[With the regulatory inquiries], some aspects appear to be based on the assumption of excess profitability, but there's a danger [they're] all targeting the same profit pool.'

As a result, he said, there would be a 'waterbed effect', where the costs would be reallocated with an annual fee.

Last month, the MBNA credit card company introduced annual card fees for a number of its customers.

PwC's 'Precious Plastic 2005' report accurately predicted the squeeze on 0 per cent balance transfer deals.

# posted by Medical Information : 2:44 AM