Are credit card fees set to return?

This looks like a likely option in the credit card industry as providers suffer a steep fall in profit margins since the Office of Fair Trading has started to introduce tough new consumer protection rules.

The first of these rules to be widely recognised was the capping of credit card default charges at £12.

Another is the ongoing investigation into credit card interchange fees which retailers must pay on credit card transactions and payment protection insurance charged by the provider which will only add to the pressure.

It is estimated that the providers could lose £1 billion of revenue due to the combined effect of rulings and investigations produced by the Office of Fair Trading, and the impact of their regulations could speed up the return of annual charges.

Annual fees were generally removed by the late 1990’s, however due to fierce competition and rising bad debt hitting the card issuers hard, we could see an introduction of annual fees of up to £35 in an attempt to recoup some of their losses.

It is generally believed within the industry that it will only take one big named lender to take this course of action then all the rest will follow suit.

Annual charges are seeming the most likely rout to take since in order to recoup these losses through interest rates alone, the APRs would need to increase (on average) by two percentage points.

It is also interesting to note that in the three months leading to September, 19 credit card providers raised their rates.