Only Finance.com - Credit card providers try to get their money back

Credit Cards - Credit card providers try to get their money back

Credit card providers, are making attempts to retrieve millions of pounds, worth of finances, that many firms have lost due to significant bad debt write-offs and the reduction in penalty fees imposed on the industry by the Office of Fair Trading in July 2006, according to the comparison website, uSwitch.com. Their attempts, however come at the ignorance of card users who don’t check their card records.

New research from uSwitch.com, reveals that last year over 2.5 million credit card accounts were either hit with an annual or monthly fee, had their credit limits reduced or were closed down altogether.

With 71.8 million credit cards in circulation there is a need for providers to take reasonable action to protect consumers from becoming over-indebted and to communicate their decisions in a transparent manner.

However, just 16 per cent of people caught up in this credit card ‘shake-up', missed more than one monthly repayment or exceeded their credit limit in the last 12 months; which would seem a good justification for providers to take appropriate action

Simeon Linstead, Head of Personal Finance at uSwitch.com, comments: "We're not against credit cards providers curbing consumers' spending if their debts are genuinely getting out of hand. However, resorting to account closures, reducing credit limits and implementing annual or monthly fees without providing over 1 in 4 people with a reason for doing so is not good for consumer confidence or financial planning. Credit card companies who are taking action to close down or make changes to customers' accounts must be completely open about how and why they have selected those customers.”

However it appears that customers, who are unable to making repayments on their credit card are essential for card firms, as they earn greater revenues from charging higher interest to these customers. 21.4 million or 68 per cent, of credit cardholders regularly or always pay their bill in full. These customers are the least profitable for a credit card company to have on its books unless they withdraw cash, use their card overseas or get caught out by the order of repayments. The most profitable group of customers are the 3.5 million or 11 per cent of cardholders making minimum repayments each month and the 21 per cent who do not have a fixed repayment pattern on credit cards.

Further research also shows that 78 per cent of British adults, have not checked their credit record in the past 12 months. Over half, 54 per cent of these people have never looked at it. Checking card records is the best way to stay one step ahead of credit card providers, as consumers will be able to spot any errors or discrepancies, that could give their credit card company, cause to change their terms and conditions or even to close their account.

Alarmingly, of those who did check their credit record in the last 12 months, 13 per cent found mistakes such as, payments listed incorrectly as ‘missed' and inaccurate credit limits.