Reduced Credit Penalties Charged Elsewhere
Some of Britain's biggest banks have agreed to cut their high credit card penalty charges by almost 50 per cent but the lost revenue is likely to be recovered through higher interest rates.
As banks cut credit card penalty charges in line with regulators' demands, there is concern that this will result in lenders raising other costs to recoup lost revenue, according to a financial services research company.
Following findings by the Office of Fair Trading (OFT) that standard credit card penalty charges were excessive and unfair, three of the country's biggest banks – Lloyds TSB, Barclays and HSBC - are to cut their charges from £20 to £12 over the next two months.
"The banks are not providing credit cards out of the goodness of their hearts. They are trying to make a living out of it and make some profit, so they will still need to cover their cost," said David Black from Defaqto.
"Banks will try to get their cash in other ways, such as increasing their rates. You will see some interest rates being increased on debit balances. I suspect we will also see some of the rewards on offer reduced or withdrawn all together, things like cash back, shopping points."
The banks argue that the fees they charge cover the costs involved when you have a late payment.
