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GREEDY banks are set to send the cost of credit cards soaring as they try to boost their profits.
Experts warned yesterday that the nation’s 31 million credit card users will each be out of pocket by an extra £100 a year.
Higher interest rates and new annual charges will be ushered in during the next couple of years and customers who are least able to manage their debts will be hit the hardest.
Banks are looking to find new ways of boosting profits because fewer people are turning to plastic in the wake of the credit crunch – while unpaid “bad debts” are still mounting.
Richard Thompson, partner at PricewaterhouseCoopers and author of a report warning of the new charges, said: “The knock-on effect will be that a lot of people are going to find it even harder to pay off their credit cards.”
The average credit card user in the UK has a debt of around £2,000 at any one time. A rise of just three per cent in the Annual Percentage Rate will mean an increase of £60 per year in interest payments alone. Annual fees of around £20 to £40 will take the extra cost up to £100.
“These increased charges are yet another effect of the credit crunch and will see people finding it harder and harder to pay their bills,” said Mr Thompson. “It will also result in people finding it more difficult to be given credit.” And Martin
Lewis, of Moneysavingexpert.com, said consumers should be very careful when choosing a credit card.
“Debt isn’t bad, bad debt is bad. Yet in these recession and credit crunch-hit times, all borrowing is tinged with the dark side. Lose your income and debt will leave you in a nightmare,” he said.
Budgeting was important, as was not simply using cards to supplement day-to-day spending. And consumers should also be careful not to try to borrow their way out of debt, he added.