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19 November 2007
A recent report has shown how credit card users in the UK have started to feel the effects of the credit crunch, as lenders hike up an array of rates and charges as well as rejecting an increasing number of applications.
According to the report there are have been in excess of one hundred and twenty five fee and charge hikes from credit card providers over the past two months, as the credit crunch continues to wreak havoc in the financial markets.
Lyndsey Burton founder of Credit Card Comparison Online, says: "While the credit card companies are increasing the cost to the cardholder, these cost rises are mostly being seen buried within the terms and conditions, which is not a place many consumers tread."
"While advertised rates remain looking competitive – the increases to these 'hidden' fees could add on an unexpected cost for many card users."
"Knowing what you want – and need – to use your credit card for is the most important step in getting the best deal. When you know this, you become ten times more equipped at choosing the right credit card to save you money."
"For example, if you often use your credit card for purchases abroad, look for a card that offers commission free use abroad, like the Post Office range. With most cards charging for foreign purchases, getting the right card could save you 2.75% on everything you buy abroad."
"Alternatively, if you’re a cash-oholic and often use your credit card to withdraw cash – Stop! Get cash out on your debit card – and restrict your credit card use as best you can to actual purchases."
There are a number of areas in which credit card companies have hikes up fees over recent weeks, and this includes foreign transaction fees, cash withdrawal fees, increased balance transfer fees, and increased standard interest rate charges.
The series of rate and fee hikes has made it all the more important for those looking for a credit card to shop around and compare the different cards and charges on offer, otherwise many could end up getting a raw deal, as credit card companies try and recoup losses from the effects of the credit crunch, bad debt levels, and loss of income from capped penalty fees.
In addition to these card companies pushing up rates, charges, and fees, many are also turning down an increasing number of applications.
The woes that have hit the financial markets have resulted in increased wariness amongst lenders, and many are operating far more stringent lending criteria to avoid the pitfalls of lending to higher risk consumers. Therefore many consumers, particularly those with less than perfect credit, may find that they cannot get a credit card.
Burton says, "If you are turned down for a credit card, wait for 3 months between credit applications and try and work on your credit score in the mean time. Simple steps such as making sure you’re on the electoral roll, checking your credit report for any easily corrected mistakes and paying utility bills on time can really help to strengthen your credit history."
 Credit card guide
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