Annual Fee May Make Comeback
Warning that credit card companies may re-introduce the annual fee
14th November 2005
A new report by accountancy firm PricewaterhouseCoopers has warned that credit card issuers may return to charging an annual fee for customers using their cards.
Annual fees were once common, but as competition in the credit card market grew more intense, they were mostly dropped and are now rarely found.
However, card issuers have claimed to be struggling to make profits recently as savvy customers played the 'card tart' game, making use of balance transfer offers to greatly reduce their interest payments.
This balance transfer game is reported to cost issuers around £80m a month, and, coupled with increased levels of bad debt, is pushing credit card profits inexorably downwards.
The recent trend of charging a balance transfer handling fee was supposedly an attempt to plug the profits gap, but analysts believe that it will not be enough and issuers will have to look for other ways of increasing revenue.
With regulators already casting a suspicious eye over default and late-payment charges, it seems a return of the annual fee is ever more likely.
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