People have never spent more on plastic than they do now, as more and more people use cards instead of cash. In fact, experts think that carrying cash could soon become obsolete. In 2005, people spent more on debit cards than cash on the high street for the first time, according to PricewaterhouseCoopers' latest study of the UK consumer credit market, Precious Plastic 2007.
But we pay a price for how much we depend on cards. The PwC research also showed that credit card companies are feeling the pinch, and their profits have stayed the same this year, even though the industry is under more scrutiny than ever before from groups like the Office of Fair Trading, the Competition Commission, and the Financial Services Authority.
Putting a stop to credit card fees has to be good news, right?
Even though credit cards are becoming more and more popular and card companies are making less money, this is not necessarily good news for most people who use credit cards.
Experts say that new consumer protection rules that require card companies to charge only GBP12 for going over your limit or missing a payment could cost the companies GBP1 billion a year.
In a "waterbed effect," what goes down comes back up somewhere else. That means that charges that are pushed down in one place show up in another.
In the end, the credit card companies will try to get their money back, so you should know where these charges could come from and how to avoid them.
They want to hurt you.
There are many ways for lenders to try to get their money back, and annual fees are one of them. Keep an eye on your credit card statements for notices from your lender about bringing back the annual fee. It's the clearest way for companies to try to get their money back.
Rates of interest are going up.
Since the Bank of England has raised rates twice in the last six months, rates may go up everywhere. Lenders offer three different rates: one for purchases, another for cash advances, and a third for balance transfers.
Cash advances and balance transfers sometimes have higher rates than purchases. As a general rule, you shouldn't use your credit card to get cash because that's where the rates are usually the highest and that's how most lenders get their money back.
You should also know about tiered APRs, since some cards have different rates for different levels of outstanding balances, such as 13.9% for balances under GBP3,000 and 15.9% for balances over GBP3,000. There is also a penalty APR on some cards. If you are late making payments, the APR may go up here.
Fees for transferring balances went up.
Credit card companies often charge a fee when you transfer a balance, and these fees are likely to go up in 2007.
At the moment, this is likely to be between 2% and 3%, and not many companies cap these fees. This makes it very expensive to transfer a large balance. No more long times without interest -
Since more people are switching credit cards often to get the best deals, they are called "rate tarts." As a result, many lenders may start to shorten the length of their interest-free periods. If you pay off your credit card debt every month, you usually don't have to pay any interest. Things could change.
If you go over your limit, your interest rates will go up.
Lenders could make it much harder to get credit if you go over your limit. For example, they could raise your interest rate or cut your credit limit.
Smart people who use credit cards are happy people.
If you know about all the possible fees when you get a credit card and keep an eye on any changes to your statements, you can avoid paying more for your credit card use.
Common sense tells us that the less you have on a credit card and the more you pay off each month, the less you will be charged, but this isn't always the case.
This is why we look at all the credit card offers on your behalf to make sure you get a deal that fits your spending habits and doesn't have any expensive fees.
What Now?
We look at all of the credit card companies to find the best deal for you. Find the right credit card for you below and compare companies in our best buy tables.
Balance Transfer Rates of 0% on Credit Cards -
http://www.moneyexpert.com/Search/Introductory-Balance-Transfer-Credit-Cards.aspx
Purchase rate credit cards with no interest can be found at http://www.moneyexpert.com/Search/Introductory-Purchase-Rate-Credit-Cards.aspx.
0% Balance Transfer and Purchase Rate Credit Cards: http://www.moneyexpert.com/Search/Introductory-Balance-Transfer-Purchase-Rate-Credit-Cards.aspx
