Expect annual fees on your credit card
May 25, 2007 by admin
Filed under News, News-Credit-Cards
The next decade is likely to herald a new era for credit cards, where users are charged simply for having them.
Financial research company Defaqto predicts that annual charges will become the norm in the next ten years as credit card companies and banks look to rebuild their profits following the capping of penalty fees.
The likes of Lloyds TSB and Barclaycard have already or are considering introducing charges of this sort and it seems that more firms will follow suit.
“Reports that Barclaycard is considering an annual fee is not a surprise and my expectation in the years ahead is that there will be a gradual move towards annual fees in the credit card market,” said David Black, head of banking at Defaqto.
“However this will herald a significant contraction in market size as people who clear their outstanding credit card balances on a monthly basis will, as they start facing annual fees, jettison credit cards in favour of using debit cards instead.”
If, as Defaqto predicts, fewer people use credit cards, it may be that those who do hold one will be hit even harder by annual fees as the providers charge more to cover the losses.
However, a mass exodus from credit card use may also work in the public’s favour as competition hots up and more favourable deals are introduced.
