Card firms cut penalty charges - but there's a catch
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Good news: a number of credit card firms have cut their penalty charges. MBNA, for example, has cut the fine for customers who breach their credit limit, or who miss or make a late payment, from £25 to £12. Barclaycard, HSBC, Lloyds TSB, HBoS, Egg and Cahoot have also pledged to reduce fees, says Helen Loveless in the Financial Mail on Sunday. The cuts follow a ruling by the Office of Fair Trading (OFT) in March, warning card firms that the penalties were “legally unfair”.
But here’s the bad news: Barclaycard will raise the interest rate on purchases by between 2% and 5% to a maximum of 29.9%. It’s known in the business as the “waterbed effect”, but you might call it robbing Peter to pay Paul.
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Still, at least Barclaycard is being upfront about its response to the OFT, says Rupert Jones in The Guardian. Other firms might be more sneaky about recouping the money.
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