Consumers fleeced for up to £1 billion on credit cards

Tweaking credit card terms and conditions has generated up to £1 billion for the credit card industry over the last year, according to market analysis by uSwitch.com.

The current economic situation is the perfect climate to cultivate these subtle small print tweaks and suppliers feel confident to make these changes as credit hungry consumers are being forced to turn to them. In fact, while credit card spending has rocketed by £130 million, the amount issued in unsecured personal loans has plummeted by £132 million, perfectly plugging the credit gap. This suggests that credit card providers are tapping into a captive market with no-where else to go.

The 6 day interest-free disappearing act...

One of the latest money-spinning tactics, introduced by 30% of the credit card market during the course of the last month is the reduction of interest-free periods. This has chopped the average number of days by 11% from 56 to 50. Potentially, providers are set to gain 72 ‘interest-charging' days a year for every new customer, raking in up to £3 million as a result. For example, from the date of their last statement, an existing customer with one of these providers will still to have 56 interest-free days before their next payment due date arrives. However, for new customers the payment due date will effectively be brought forward by 6 days, thus reducing the interest-free period to 50 days.

Plastic fee-tastic

Since their introduction four years ago, balance transfer fees have provided the means for providers to attempt to recover the £600 million in lost revenue caused by 0% introductory deals around six years ago. These fees serve to penalise savvy consumers who regularly switch to the next best balance transfer deal.

Balance transfer cards currently make up 76% of the credit card market and 91% now levy a fee compared with just 29% three years ago - just 10 credit cards offer a fee free transfer. What's more, the average balance transfer fee has increased by 373%, from 0.59% to 2.79%, or in monetary terms, from £11.02 to £52.09, and currently amounts to a staggering £412 million in annual revenue for providers.

Cash withdrawals

7.3 million consumers have made an average of 5.2 credit card cash withdrawals each in both the UK and overseas totalling £500. This costs consumers £22.07 each in the average billing period (56 days).

Three years ago, the same level of spending would cost just £16.12 in interest over the same period.

By hiking rates by more than a third, this income has inflated by up to £43 million since 2005.

Annual fees

Cards which carry an ‘annual fee' offer consumers additional benefits such as airmiles, reward points, negotiated discount offers, and travel and lifestyle services.

The average annual fee for this type of card is £95.82 - 82% more than the average fee in 2007 which stood at £52.67.