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By David Stevens Personal Finance Correspondent
Tuesday, 9 September 2008
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Blowback from penalty fee fightback?
What sort of blowback may we be experiencing?
- Average interest rates on purchases up from 14.9% (April 06) to 17.7% (Aug 08)
- Average interest rates on cash withdrawals up from 18.1% (April 06) to 24.7% ( Aug 08)
What is the best credit card for purchases?
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IT is perhaps a little bit unfair to point the finger squarely at the hyperactive, shouty man at the centre of the revolution to claim back ‘unfair’ bank and credit card charges, but responsible bank and credit card customers are starting to feel the blowback.
While the test case which will eventually decide the legality of existing penalty charges trundles slowly onwards and the thousands who have attempted to claim those penalties back await the verdict, lenders have been biting back and raising rates across the board.
Need it least
These rate hikes have hit everyone – the responsible payers and the guilty late payers - right at a time when we need it least.
Average interest rates on purchases have increased from 14.9% in April 2006 to a slightly more painful 17.7% now.
In that same period the Bank of England lifted interest rates a total of 0.5%.
If these figures from Moneyfacts are to be believed, there is a strong possibility we could all be paying an extra 2.3% interest because of this late payer’s revolution.
While thousands of Britons stand to earn back a good portion of their penalty charges from the last six years, the burden now placed on responsible payers calls into question just how great the consumer crusade – led ably, though not solely, by self-proclaimed money saving expert Martin Lewis - really has been.
While advocates of the fight – not least Lewis himself – rightly claim that if something is unfair it should be fought there is little doubt that, should these figures be indicative of the banks fighting back with higher charges elsewhere, there is a slightly bitter taste in the mouths of disciplined customers who never have never defaulted.
Clawing back
And it’s not just interest rates on purchases where lenders may be clawing back lost ‘earnings’ from late payers.
Anyone foolish enough to withdraw cash from an ATM using their credit card will have seen the interest rates on such withdrawals increase by a whopping 6.6% - as if they weren’t extortionate enough already.
Real cost
In the long run, however, a lower – and perhaps fairer - penalty fee structure across the board will positively serve most bank customers and credit card users.
After all, just about everyone will default on a credit card payment, or slip past their overdraft facility at least once in their lives.
That it may have come at a real cost however should not be forgotten.
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