As widely predicted, new research has found that credit card providers in the UK have, almost across the board, increased their interest rates to counter the recent Office of Fair Trading crackdown on penalty charges in the cards industry.
In summer, the UK Office of Fair Trading (OFT) imposed a GBP12 limit for penalty charges on credit card issuers. The move forced many to effectively cut their penalty fees in half.
Critics at the time, including many of the card issuers hit with the reduction, said that the lost penalty revenues would simply be made up in other charges. Sure enough, the issuers quickly came up with a number of ideas to recoup the money, including increasing balance transfer charges and charging for previously free services such as statements.
However, many card providers have also made upfront changes by increasing headline interest rates, which has led some to suggest that the OFT move has shifted the financial penalty from those who had actually broken the terms of their contracts to all users, regardless of fault.
According to study producers Moneyfacts, 19 leading credit card issuers have put up their charges since the OFT move. Most high street lenders have increased their rate to some degree, while American Express has raised its rate by 6% and Barclaycard’s Simplicity platinum card interest rate has increased by 12% on cash withdrawals.