Credit card fees to balance the battle with rate tarts

Monday, November 14, 2005

Credit card issuers are ready to reintroduce annual fees for their credit cards according to accountancy firm PricewaterhouseCoopers (PwC).

The firm has said that this is a reaction to the credit card issuers losing money on what the industry now calls rate tarts – people who consistently transfer balances between cards to prevent the accruing of interest charges.

"There's an enormous amount of pressure on margins and more pressure from regulators and competitive threats and therefore one can't expect lenders to sit back and do nothing," said Richard Thompson, a partner at PwC.

"There's no reason why annual fees shouldn't come in."

According to research by the accountancy firm into credit cards, called Precious Plastic 2006, rate tarts have cost the industry approximately £600 million in lost revenues, despite the fact that such balance transfers often carry a two per cent handling charge.

The survey also revealed that the amount of unsecured personal debt in general is on the rise, up 8.4 per cent to £189 billion in the 12 months to June.