Warning sounded over rising credit card charges

Credit card operators have been finding ways of clawing back lost profits since a cap of £12 was imposed on their penalty fees by the Office of Fair Trading, the consumer body Which? reports.

Examples include a hike in transfer fees – for switching a balance – from a typical 2 per cent to 2.5 or 3 per cent. On top of this, the minimum amount customers are allowed to repay monthly has been reduced (leaving many borrowers deeper in debt). And some providers have changed the way they allocate repayments, so that debt charged at a lower rate of interest is paid off first, allowing expensive credit to mount up.

The OFT took action last year in response to concerns that consumers were being ripped off by penalties of up to £39 for missed payments and defaults on their credit cards.

Martyn Hocking of Which? said: "Credit card providers seem to be resorting to a raft of ingenious methods to recoup lost revenue following the OFT crackdown. To avoid being stung, always check the small print to make sure you know what charges apply."

Which? researchers listed 10 major changes to watch out for. In particular, customers should note that providers advertising low annual percentage rates (APRs) do not necessarily have the cheapest interest rates, as there is no standard method for calculating an APR. In addition, cardholders can be hit by "cheeky" charges – for example, for failing to tell the lender that they have moved house, or for not using their cards enough.

Lloyds TSB is to start levying an annual £35 fine on "low users".

Cheques issued by credit card companies for customers' use can also prove expensive: the interest rate is often more than 20 per cent, usually with no interest-free period.