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Thursday 24th May 2007
Experts say that the introduction of annual fees on credit cards by some of the big high street banks is unsurprising, but consumers may decide to switch over to debit cards to avoid the charges.
Defaqto's David Black believes that since Barclays and Lloyds TSB have announced plans to charge annual fees for people who never use their credit card or only use it seldom, other banks will soon follow suit.
By 2010, he expects the practice to be the norm, Mr Black saying: "Reports that Barclaycard is considering an annual fee is not a surprise and my expectation in the years ahead is that there will be a gradual move towards annual fees in the credit card market.
"However this will herald a significant contraction in market size as people who clear their outstanding credit card balances on a monthly basis will, as they start facing annual fees jettison credit cards in favour of using debit cards instead."
It seems banks are trying to claw back profits after being hit by a ruling by the Office of Fair Trading in August 2006, which capped the penalty fees that credit card providers could charge at a maximum of £12.
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