Credit card tricks - ensure you aren't paying too much says Which? Money

The consumer watchdog, Which? Money found that 28 providers of widely-held credit cards had either increased interest rates or other charges, reduced the number of days to pay or reduced the number of interest-free days over the last year up to February 2009.

• Credit card rates have gone up by an average of 0.5 per cent but Mint, NatWest and Royal Bank of Scotland have all made significant rate hikes of 4 per cent, and Abbey and the Post Office forced up rates by 3 per cent.
• Both MBNA and Alliance & Leicester have reduced the number of interest-free days and days to pay on cards.
• Only eight companies still offer cashback cards – less than half of those available two years ago. Some have also cut the amount of cashback available.
• Many providers have put up balance transfer fees over the year. Ulster Bank increased its introductory balance transfer rate from 0 per cent to 4.95 per cent and also introduced a transfer fee of 2.9 per cent to its introductory offer on two credit cards.
• Cash withdrawal fees have been creeping up too - Debenhams Mastercard minimum cash withdrawal fees and credit card cash withdrawal charges have both doubled in the last year.
• Other companies, such as Egg, have left their headline APR alone to entice new customers but put rates up for many existing customers.

Which? Money offers people with credit cards the following advice:

• Keep an eye on your card’s interest rate and charges to make sure they’re not creeping up.

• If your provider puts your rate up, don’t take it lying down – switch to a Which? Money Best Buy.

• If you tend to use your card to borrow, Which? Money Best Buys take into account how providers calculate interest to find the cheapest card.
• If you usually pay your bill off in full the APR is not important, so look for a credit card which offers cashback.
• If your bank has increased your credit card interest rate, then complain - particularly if it hasn’t followed the industry’s "fair principles"¹.

The full article Credit cards on trial appears in the May 2009 issue of Which? Money magazine.

For Follow visit www.which.co.uk/money

¹At the end of 2008, banks agreed a set of "fair principles" with the government, designed to put an end to last minute hikes in interest rates. If credit card companies put people’s interest rates up, it should now do the following things:

• Offer the opportunity to close the account and pay the balance off at the old rate.
• Provide at least 30 days’ notice of a rate increase, and restrict how often they will increase it.
• Not increase the interest rate if the card holder is struggling to repay their credit card debts.
• Give people breathing space of 60 days if they are struggling to repay their debt. They should not chase the debt if the card holder is trying to sort it out and agree a repayment plan.