Penalised for NOT using your credit card

Lloyds TSB are planning to charge around 50,000 of their credit card customers a £35 annual fee. Customers are to be given 10 days notice before it is implemented on March 1st.

Whilst the lender is portraying this as a very positive move to their customers, many feel it is in response to last year’s decision by the Office of Fair Trading for financial institutions to cut fees to £12. These institutions must recoup the money somewhere, and it is well known that those customers who clear their credit card every month or who generally do not use it very often do not generate income for the bank on their purchases, interest on balances and charges. In fact, they may be costing the bank since they still receive monthly statements, which costs for the paper, printing and postage !

Lloyds TSB is the first of the 5 main high street banks to take this step, but it is widely assumed that others will follow suit.

This has happened hot on the heels of proposals to introduce fees on current accounts.

The trade body for institutions APACS’ head of communications, Sandra Quinn states that introduction of annual fees is a natural reaction to the OFT’s decision on default charges last year. She reminds us that credit card companies are not ‘charitable organisations’ and common sense dictates that if they have had one source of revenue blocked, then they will naturally turn to source it by some other means.

A spokesperson for Lloyds TSB said, “This fee applies to just 1% of our card base. It is predominantly targeted at people who don’t use their cards. We want to encourage people to start using their cards.” He goes on to defend their position by clarifying that under no circumstances are they encouraging people to get into debt, adding that there are plenty of customers who use their cards ‘responsibly’.