OFT to look into credit card surcharges

Credit cards have undoubtedly made life easier for many people, enabling them to enjoy flexibility with their repayments, the security of not having to use cash, and the ability to make purchases with ease using the phone or the Internet. Many people use their credit and debit cards to make all sorts of purchases online these days, which means that they can enjoy the ease and convenience of browsing products and services from the comfort of their own homes, and making payments safely and securely on reputable websites.

However, one sting in the tail of using credit and debit cards to make payments online is that many retailers and companies charge administrative fees, and many of these are quite extortionate, pushing up the cost of the purchase enormously. Many cardholders have made a purchase only to realise at the last minute that they are going to be charged a hefty fee on top of the purchase price simply because they are using their credit or debit card.

An official from one travel site said: “Many travel providers are not only passing the bank charges to customers, they are actually increasing them to generate extra revenue. The fact that some holiday companies also charge for debit card payments is a worrying development.”

A super-complaint has been launched by the consumer campaign group Which? for the various surcharges and fees to be looked into. The Office of Fair Trading is now looking into these fees and could end up making companies reduce the fees that they charge by way of administration costs for credit and debit card use.

The UK Payment Association said: “The credit card costs are per transaction. If you are booking six tickets at once, or one ticket in one credit card booking, the processing costs would be the same. It’s hard to see how companies can charge per item.”

 

Tags: fee, consumer campaign group, administration costs, online, sting in the tail, extortionate, purchase price

More sneaky charges from car insurers over last six years

A recent report has shown how more and more vehicle insurance companies in the UK have started applying sneaky charges to the policies of consumers, contributing to the soaring cost of vehicle insurance. Over the past six years the number of insurers applying these so called sneaky charges has soared, making it costly for consumers to take out and maintain their vehicle insurance policy.

Research was carried out to show how an increasing number of insurance firms were applying these charges. Since 2004 the average cost of making changes to policies has risen steeply, and the number of insurance firms that make these charges has rocketed since this time.

The figures show that six years ago around 22 percent of insurance firms charged a fee for an early cancellation, but this has now increased to 70 percent. In 2004 only 17 percent of insurance firms made a charge to change details on a policy but this has now leapt to 67 percent.

The cost of making charges to policies or cancelling them early can be very high these days, with some average fees thought to have doubled based on the figures, which were compiled by Defaqto. Some insurance firms now even charge set up fees and renewal fees to customers that want to take out cover.

Mike Powell, insight analyst for general insurance at Defaqto, said: ‘There has been a noticeable and significant trend for motor insurance policies to charge administration fees for features that were in many cases previously standard services. Many consumers will be unaware that they may actually be paying a set-up fee or a renewal fee for their motor insurance. Such fees will be detailed in the accompanying documentation or in the renewal quote.’

Tags: fee, Insurance, finance, Vehicle insurance, insurance firms

Banks fleecing customers with overdraft fees

It has been revealed in a recent report that many of the UK’s banks are fleecing their customers with extortionate overdraft rates and fees despite the fact that many of the customers, as taxpayers, have a stake in the banks because of the bailouts that occurred during the credit crisis, which were funded by taxpayers’ money from the public purse.

Last month these overdraft rates are said to have hit a new high, coming in at an average of 19.1 percent. This is despite the fact that the base interest rate still stands at a record low of just 0.5 percent, which is where it has stood for the past eighteen months. The margin between the base rate and the rates that banks are charging on overdrafts is now astonishingly wide, and many of the most cash strapped customers are being hit with the rocketing overdraft charges.

Natwest and the Royal Bank of Scotland are said to be amongst the worst offenders, and these are both part of the RBS Group, in which taxpayers have a massive 84 percent stake. The average rate of interest charged on overdrafts was a massive thirty eight times more than the base interest rate, which means that banks are making a huge profit from customers that fall into the red.

An official from the Independent Banking Advisory Service said: ‘Banks have been allowed to increase their margins despite the bank rates being so low. There is no incentive for them to do otherwise. The level of profiteering is completely out of control. Nothing about it is fair or reasonable. We face reduced incomes and increase household bills and yet again the banks are compounding our misery. We bailed them out but they have no qualms about making matters worse in our hour of need. The Government should introduce a cap on the rates. But instead it protects the banks at our cost.’

Tags: overdraft, fee, interest rate, high, overdraft fees

Thousand leave Halifax over bank charge changes

It is reported that around seventy thousand customers have left the High Street banking giant Halifax amidst anger over changes to the way it charges for overdraft facility usage. There is also speculation that customers of the bank are still leaving, which means that eventually the changes may have cost the banking giant in excess of 100,000 customers. Many customers are said to have moved to rival banks, with many others trying to open new current accounts with an alternative bank so that they can leave Halifax. Read more

Tags: Office of Fair Trading v Abbey National plc, halifax, fee, overdraft, Banking in the United Kingdom, Bank charge

New packaged accounts launched by Abbey

Spanish owned High Street bank, Abbey, has recently launched two new packaged accounts for its customers, and according to reports has started a new packaged current account war amongst banks that are vying for the business of consumers. After taking a 28% share of the mortgage market this year, the ambitious bank is now looking to increase its share of the current account market by offering these packaged accounts, which offer a range of benefits for consumers. Read more

Tags: current account war, mortgages institution, bank accounts, biggest criticism, official, abbey

Different types of bank account for UK consumers

Over recent years banking services in the UK have come a long way and consumers have enjoyed more choice than ever when it comes to finding a suitable bank account for their needs. In the past most banks offered one standard bank account for the average consumer, take it or leave it. However, with competition stiff between the growing number of high street and Internet banks, and consumer needs expanding on a continual basis, most banks now offer a choice of accounts to suit a wide range of needs and circumstances. Read more

Tags: something, premier accounts, fee, salaries, bank accounts, solution, Cashcard Account, current accounts

Additional insurance fees cost drivers £333m

Motorists are being charged an average fee of £22 for amending simple details on their car insurance policy, according to new research.

Findings from uSwitch showed that with 14 million consumers making changes every year, drivers are collectively £333 million out of pocket each year.

The company states there is no legislation in place to protect consumers from excessive charges and fees, something which it says needs rectifying.

Ashton Berkhauer, insurance expert at uSwitch.com, said that consumers need to know where they stand and the easiest way to do this is for the amount providers charge to be consistent across the insurance industry.

“This would make it clearer for consumers and bring transparency to the market. Currently, making an adjustment to your policy can cost you from £0 to £25 and the price for cancelling a policy mid-term can be unlimited,” he continued.

Meanwhile, further research from the company shows that extending insurance to cover the duration of a trip abroad can cost motorists up to £510.

Tags: excessive charges, trip, car insurance policy, fee, amount, com, Ashton Berkhauer, additional insurance

Uncapped mortgage charges ’skyrocketing’

The number of mortgages with uncapped upfront fees has risen dramatically in the past 12 months, it has emerged.

Now at 506, the number is five times what it was a year ago, with application fees rising as high as 3.25 per cent of the loan value, according to MoneyExpert.

Sean Gardner, chief executive of the website, commented: “Borrowers need to look carefully at mortgage deals and not just focus on the interest rate. What might look like a good deal will soon become a bad deal once fees are taken into account.

“Mortgage application fees are nothing new but lenders often won’t publicise a change to their fee structures, meaning some homeowners could be unaware of this huge shift to uncapped charges.”

Capped upfront fees have also gone up in the past year by an astonishing 63 per cent, with the average fee growing to £834 from £509 in November last year.

Mr Gardner concluded that those confused about fees should work out how much they are able to afford and then seek advice about whether the fees can be added onto the loan.

Tags: borrowers, executive, fee, advice, United States, business, mortgage, chief executive

Credit card providers making a killing

Small adjustments to charging and fees over the past years have added up to credit card providers making a mint on their customers.

According to uswitch.com, the credit card companies will make a staggering £459 million this year on balance transfer fees alone.

It explains that the “stealth charges” racking up the money also include cash withdrawal fees, zero per cent deals and negative payments hierarchy among other things.

“It’s no great surprise that every zero per cent balance transfer credit card now levies a charge. Historically, fee free deals fuelled the switching market and marked the birth of the rate tart, quickly turning into a huge financial drain on the industry, to the tune of around £600 million,” said Mike Naylor, personal finance expert at the website.

Furthermore, the company found that £71 million is made by providers from people withdrawing money on their credit cards.

Tags: fee, finance, financial drain, people withdrawing money, birth, cent, credit card companies

No interest will be charged on A&L overdrafts

Another bank has revealed its new charge structure with regards to overdrafts and bounced cheques. According to recent reports the Alliance and Leicester will now no longer be charging any interest at all on its overdrafts on current accounts.

The bank will also be reducing the charges applied for a bounced cheque, which will go down from £34 to £25. Officials from the Alliance and Leicester state that in place of interest charges on overdrafts new daily charges will come into force.

Banking will still be free for customers that keep their accounts in credit, state bank officials. The new charge structure is due to come into force around the third week of October. Some banks, such as Lloyds TSB, have already announced their plans to reduce overdraft charges and fees for bounced cheques, which many think is a direct response to the investigation into bank charges that has been carried out by the Office of Fair Trading.

However, officials from Alliance and Leicester claim that this is not the case, and that they had plans to change the fee structure prior to the investigation.

One official from the Alliance and Leicester stated: “The combination of fees and interest is unnecessarily complex when you are trying to present your business as simple.”

Under the new charge structure customers using an authorized overdraft will be charged 50p per day up to a maximum of £5 per month. If the overdraft is unauthorized then the customer will have to pay £5 per day until the account is brought back into order.

One industry professional stated: “Customers should ask themselves whether the new simplified fee structure does actually save them money in the long-term.  According to our analysis, the new way of charging will result in Alliance & Leicester customers being marginally better off.”

Tom Smith
24th October 2007

Tags: account, interest, pay, bank, charge, cost, customer

Court still allowing consumers to sue over bank charges

The row over unlawful and unfair bank charges has been raging for some time, and many bank customers have managed to reclaim past charged for exceeding the overdraft limit and for returned cheques and direct debits – some going back up to six years – after UK financial regulators stated that the fees were unjust and unfair last year. Finally, earlier this year, regulators and banks decided that a test case was needed in order to determine whether or not the charges were fair.

In the meantime courts and judges were advised that pending cases filed by bank customers that were trying to reclaim their charges could be put on hold until after the test case had gone ahead in order to make a decision easier. However, despite this many consumers are continuing to successful sue their banks, which indicates that many courts and judges are continuing to let these actions to through.

One claimant who won nearly £3000 stated that her case was only heard as a result of the bank not turning up to defend itself. She stated: “When it was my turn, I found out that there was nobody from Abbey to deal with my case and went in to face the judge alone. She told me that as Abbey hadn’t turned up to defend against me, she would be finding in my favour, but had Abbey turned up, she would have granted a stay, as that was what they were all doing until after the test case.”

Apart from in Wales, and in Devon and Cornwall, where a blanket stay of outstanding cases has been granted, courts and judges can make their own decisions, and many are doing this on a case by case basis according to some officials.

• Claimants strike back at banks

Tom Smith
29th September 2007

Tags: Banking, blanket stay, fee, bank charges, september 2007 court, bank customers

Barclays now offers travel cards

With millions of Brits heading off on their summer holidays abroad, one major consideration is how to deal with taking money abroad.

Some people rely on cash and traveller’s cheques for spending abroad, whereas others prefer the convenience of credit and debit cards, despite the security risks associated with using your plastic abroad. However, there could be a safer alternative available, that combines easy and convenience with increased security.

Pre pay travel cards are available for consumers that want the ease and security of having a card rather than cash when they go abroad, yet do not want to risk loss or theft of their regular credit and debit cards. These cards are also useful for those that want to ensure that they do no spend more than they have budgeted for when they go abroad. Like a pre pay phone, these cards can be loaded with cash before you go on your holidays, and can be used up to the amount that you have loaded onto the card.

Barclays has now decided to offer travel cards to customers, which will be free to obtain and load with cash. However, ATM withdrawals will be charged at 2%, with a minimum £1.50 charge, and there will be a 2.75% conversion fee if it is in a different currency. A Barclay’s spokesman stated: ‘Pre-pay cards are safer than cash and more flexible than travellers’ cheques. Furthermore it helps holidaymakers budget for the spending on their trip by not allowing them to spend more than the balance on their card.’ 

There are travel cards available from other providers as well, and these are the Post Office, which charges a flat fee of £10 for the card and for loading, and from Travelex, which charges 2% of the amount being loaded onto the card with a minimum fee of £10.

Tom Smith
17th September 2007

Tags: travelex, travel, earn, spend, rewards, barclays, fee, cards, credit

Banks have paid out £200 million this year

According to the latest statistics banks in the UK have already paid out over £200 million this year in the form of repaid bank charges to customers that have made claims for any charged imposed over the past six years.

The study shows that over £200 million has been paid out in just the past seven months alone reflecting the financial problems that have resulted for banks as a result of these bank charges.

The report was put together by Credit Suisse, and suggests that around 1% of the profits of the major groups will be lost as a result of repaying these bank charges, which have been dominating the financial headlines in the UK over recent months. In addition to having to repay these charges, which have amounted to thousands of pounds for some customers, banks have also had to take on extra staff to deal with the flood of claims, which has cost even more.

Although banks have been doing their best to get out of having to pay these charges back to customers, they have also been unable to justify the charges to courts and regulatory authorities. Banks have traditionally charged up to around £35 for exceeding an overdraft limit and for returned cheques and direct debits. However, the cost actually incurred by the bank is though to be around £2-£5, which means that the banks have been making hefty profits from the charges.

A decision with regards to bank charges, and what can be classed as a fair fee, is expected at the end of the year. It was expected earlier but was postponed so that further reviews could be carried out following concerns that free banking in the UK could come to an end as a result of these bank charge claims.

Tom Smith
13th September 2007

Tags: lost, charges, high, reclaim, court, bank, fee, claims

Holidaymakers pay extra in credit card fees

British holidaymakers will pay up to £258 million in fees over the summer as their credit card companies charge them for making transactions abroad, a new study has found.

According to the report from the Post Office, Britons will collectively spend around £9.4 billion, though many are unaware that they will incur extra costs for borrowing while overseas.

Of those people questioned, nearly half said that they had no idea that such extra charges would apply, while 37 per cent believed that their lender did not levy an additional fee, despite research showing that the vast majority of firms charge on average 2.75 per cent per transaction made.

In addition, 26 per cent of people admitted to failing to budget for their holidays before they went away, meaning that they left themselves vulnerable to having to borrow and get into debt.
“We are now four times more likely to spend on plastic abroad than 10 years ago,” said the PO’s Gary Fitton.
“It’s shocking not only to see how much people are being penalised to use their cards on holiday, but how few are aware of this.”
The findings come soon after the UK payments association Apacs revealed that fraud committed abroad on UK-issued cards totaled £118.2 million last year, an increase of £36 million.

Tags: fee, idea, summer, plastic, finance, United Kingdom, apacs, london

Woman furious over overdraft fees

A twenty year old university student recently expressed her anger over her building society’s failure to contact her about a tiny overdraft balance that went on to accrue months of expensive fees.

The woman stated that her account with the Nationwide Building Society was just 95p overdrawn after she wrote a cheque. However, whilst she was away studying at university the building society added charges to the overdraft on a monthly basis. When she arrived back from university some months later, the customer stated that she discovered that £250 in fees had been added to her student account.

According to the customer the Nationwide had been adding £20 each month to the account because of the outstanding 95 pence, but had made no attempt to contact her to let her know the situation.

She stated: ‘I had no idea the account, which I had not used in ages, was overdrawn. I was away at university for long periods of time.’

She added:  ‘When I returned I found a massive pile of letters from the Nationwide waiting for me and an overall overdraft of almost £250. I was pretty angry with them because they had not tried to contact me by phone and it was quite obvious the account was not being used. They said my credit rating could have been affected which would have been bad so I decided to do something about it.’

The customer stated that she contacted Nationwide regarding the fees, but the building society said it was only prepared to waive fifty percent of the fees that had been charged. The customer then went to her local MP about the situation, and as a result of this the total fee was finally waived but the building society also closed her account.

Tom Smith
4th July 2007

Tags: fee, overdrawn, charge, 95p, society

Annual fee imposed by Morgan Stanley

Customers using the Black cash back credit card with Morgan Stanley have been hit with a £20 annual fee. The Black credit card is offered to customers that have been turned down for the platinum card with Morgan Stanley, although it is not actively marketed by the company.

The cash back levels on the Black card are 1% for the first £2000 worth of purchases in the year, and 0.5% thereafter. However, the cost of the annual fee means that those spending less that £2000 on their cards will effectively have their benefits offset, which means that the card is not really providing any reward at all, despite being a cash back card.

According to officials from Morgan Stanley not all customers using the Black cash back credit card will be charged the annual fee.

One Morgan Stanley spokesperson stated: ‘We have received the spending patterns and repayment history of customers and as a result we have imposed the fee for a number of customers.’

However, some cardholders are annoyed by the charge, and feel that it is unjustified and unwarranted.

One Black cardholder stated: ‘I spend around £300 a month on the card and clear the balance by direct debit at the end of each month. I’ve never missed a payment and I suppose I’m one of those customers that doesn’t actually make the credit card company any money. I liked the cashback aspect of the card, but this fee doesn’t make it worthwhile now.’

The annual charges are due to come into force in June of this year, and consumers that want to avoid having to pay an annual fee should start looking for an alternative credit card before this time. As with many other card companies, it is thought that this annual fee could be a way for the card company to recoup some of the revenue losses that resulted from financial regulators placing a ceiling limit on penalty charged last year.

Tags: stanley, morgan, back, annual, charges, earn, fee

No fees please

A new range of mortgages have been launched by a leading building society which come with absolutely no fees.

Yorkshire Building Society has announced the new range with the aim of simplifying the mortgage market for borrowers.

The firm is promoting its range as having no product fees, no legal fees, no standard valuation fee, no money transfer fee and no higher lending charge for re-mortgages.

The leading product in the range is a five-year fixed-rate mortgage at 5.89 per cent but the building society has a large number of deals on offer.

“There has been an inexorable rise in product fees in recent months, as lenders compete to get in to Best-Buy tables with headline rates,” said Yorkshire’s product development manager David Heshon.

“It has become increasingly difficult for customers to work out what the best deal is.

“With this new range of products what you see is what you get – a straightforward rate, with no additional up-front costs,” he added.

Borrowers, particularly those who are venturing into the property market for the first time, are finding it increasingly difficult to find a mortgage that best suits their needs so shopping around for deals such as this can be extremely beneficial.

Tags: Valuation, UK mortgage terminology, product fees, money transfer, valuation fee, recent months, borrowers, fee

Fixed-rate mortgage fees rising

Mortgage lenders are raising their application fees for fixed-rate mortgages, as the products become more and more popular.

With interest rates currently standing at 5.25 per cent and fears among many that future rises are imminent, first-time buyers are fearful of taking out variable rate mortgages.

However, as lenders have recognised the growing trend, they have begun increasing application fees, according to MoneyExpert.com.

The average application fee has risen by 18.5 per cent since last August, with products that have a fee of at least £750 also becoming much more common.

“Homeowners are desperate to fix their mortgage rates to avoid incurring further costs caused by rising interest rates,” said Sean Gardner from the website.

“It’s the sensible option, as further rises aren’t out of the question.”

People considering taking out a mortgage, particularly first-time buyers, may find that a fixed-rate is the best option for them.

However, it is recommended that you shop around to find the best mortgage to suit your circumstances and ensure that you can realistically afford to pay the application fee.

Tags: fee, trend, first time buyer, option, Business Finance, homeowners, personal finance

Credit card market lacks competition

There is a lack of competition in the debit and credit card market, meaning consumers are getting a bad deal.

That is according to a new report published by the European Commission (EC) and it backs claims previously made by the British Retail Consortium (BRC).

For some time now, the BRC has been arguing that there is a lack of competition and that fees charged for transactions are an unjustifiable tax.

The BRC has revealed that the fees we pay are fuelling excess bank profits and figures from the EC report show that credit card issuers are making profits of 40 per cent.

Calls are now coming for the Office of Fair Trading to recognise the findings of the EC report in its current case against Mastercard and Visa’s fee arrangements.

“This report is a welcome indication that the commission agrees with us that banks are abusing their position,” said Kevin Hawkins from the BRC.

“The report sends a clear signal to member states, including the UK, that consumers and retailers have been bearing the costs of that abuse.

“We’ve long argued that high charges are an unjustifiable tax on consumers leading to excessive profits for the banks,” he added.

Customers looking to get a credit card should shop around and try to find the best deal to suit their personal needs.

Tags: kevin hawkins, United Kingdom, MasterCard, fee, credit, Credit card, BRC, tax