Contrary to belief it appears that some banks will go to any length to get you to part with your hard-earned cash. With more and more charges being applied when customers use their credit card to withdraw money, there seems to be some financial trickery afoot.

Using a credit card to obtain funds is acknowledged as a very expensive method, however, in the current economic climate banks are clawing desperately at new ways to drum up money. This recent anxiety has been brought on by the fact that the Office of Fair Trading (OFT) are considering possibly forcing a cap on overdraft fees. Unauthorised overdrafts can turn out to be a useful side-earner for banks, as they can collectively receive an estimated amount of up to £3.5bn each year, which works out to approximately £10mn a day. If this additional earner is derailed then the banks will need to find some other way to raise surplus cash.

Free banking on standard current accounts could be facing a farewell, while some banks declared they were to implement increases of up to 20% made up of the monthly fees which are applicable to packaged current accounts. Around 7 million customers belonging to the Royal Bank of Scotland, NatWest and Lloyds TSB hold packaged accounts, which include extras such as travel and mobile phone insurance. In order to avoid exposing themselves as advocating a money-raising scam by pushing up prices on service charges, the OFT are instead urging customers to withdraw cash on credit cards as a more subtle way of raising money. The Office are worried about the effect of capping overdraft charges, as this will only induce a price hike on services elsewhere.

According to Moneyfacts, the average interest rate on credit card purchases has risen from 14.9% to 16.4% over the last two years. The OFT would cap £12 of the charge levied on people who missed or were late with their card repayments, leading to losses for both banks and credit card companies. The stark increase in cost that people are confronted with when attempting to obtain their money is another issue of contention, with the average interest rate for credit card cash withdrawals rising from 18.1% to 24.3%. If nothing else, this is set to start alarm bells ringing for consumers who are reliant on their plastic. In addition to the 3% extra costs incurred when withdrawing money while abroad, consumers must think very carefully about how to facilitate their finances in an economy that is becoming riskier by the second.

Credit card companies, as a rule, will apply a negative payment hierarchy, so the monthly repayments you make will first go towards the part of your debt with the lowest interest rate. The most expensive debt is not reduced until the cheaper debt has been cleared. An exception to this unfavourable rule is Nationwide Building Society, as well as a handful of others. Unless you are confident that you can make your repayments in full, or at least pay off a large part of the debt, it may be beneficial to look into a 0% balance transfer deal, such as that offered by Egg.

Remember that the higher interest you are paying, particularly in the current unstable financial climate, the greater the chance of you losing control over your debt. Make sure to understand every aspect of your credit card contract so as to avoid being the victim of rising interest rates. Your credit card, if used appropriately and effectively, can be a powerful financial tool, just ensure that you don’t use it for taking out loans as the charges involved can be devastating.