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Cradit Card Fees

Changes to fees One of the ways some credit card companies have tried to make up for this £300m loss is to increase balance transfer fees – a percentage of the balance that must often be paid when it is transferred to a new card – for example, from 2% to 2.5%, and to remove the cap on them. In the past, this fee was often capped at, say, £50, regardless of the balance amount.

This is one aspect of balance transfer deals you should be aware of before taking one out. “While they are a one-off fee when you transfer your balance, if you keep transferring it you will end up paying a lot,” says Tracy North, personal finance PR manager at Switch. If you transfer a balance of £5,000, for example, a fee of around £125 could apply each time.

Many companies have also increased fees for cash withdrawals on all deals, with 2% increased to 2.5% common, and some have even introduced extra ones, such as for unpaid cheques or direct debits or copies of statements, so watch out for these.

Credit card charges for balance payers 'unlikely'

It is unlikely that banks will introduce extra charges for credit card customers who pay off their balance every month, according to an expert.

Lloyds TSB's announcement that it would introduce an annual £35 charge for some 'low-usage' customers of its credit card has sparked fears among many watchdogs that banks would also introduce charges for other customer groups who make less money for them.

However, those who pay off their balances are unlikely to see a similar charge introduced for them, head of personal finance at money website fool.co.uk David Kuo commented.

Banks relied on customers using their credit cards and made money from a transaction fee every time the card was used, he pointed out.

He commented: "You have to remember that they make a transaction fee on every credit card that is used. They are going to make money on that from the traders anyway so in that sense they are not really that bothered whether or not people do pay off their charges."

However, he added that banks were trying to recoup the money lost in refunding penalty fees to customers, pending the Financial Services Authority's investigation into the fees.

In introducing the charges, banks were attempting to "test the waters" and find out what consumers find acceptable, he claimed.

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