By Louise Greenwood
BBC Radio 4's Money Box
Many credit card companies are now setting aside more money to cover bad debts, and customers who fall foul of the small print or miss a payment may find they are facing new and unexpected bills.
Late charges "need to be reduced", OFT has said recently
In July, the Office of Fair Trading (OFT) announced its findings following an investigation into late payment charges imposed by card companies.
The OFT was acting after complaints from consumer groups, and it concluded that the charges - usually around £20 to £30 - were excessive.
OFT Operations Manager Steve Wood told BBC Radio 4's Money Box programme the card companies are now being asked to justify their charges.
"We believe that overall they are seeking to recover more than they would be entitled to under the law," he said.
The card companies have until the end of October to respond to the OFT's findings.
Money Box listener Charlotte from Leeds borrowed £13,000 at 0% on her MBNA credit card.
She missed a minimum payment for five pounds in May when she failed to receive her statement, but refused to pay the £25 late payment charge.
MBNA customers who miss a payment face invalidating their deal
"I feel it was really unreasonable to be charged £25 for not paying five pounds," she said.
However, MBNA told her it was withdrawing her 0% deal and she would have to pay interest on her whole balance at the card's standard rate.
"They told me... I was now liable to pay something in the region of nearly £400 interest at 15.9%, and obviously the 0% interest was the whole reason I signed up to the card."
When she complained, MBNA refused to reinstate her 0% deal, but as a goodwill gesture reduced her interest to 3.9%, still leaving her with a large, unexpected bill every month.
MBNA has confirmed to Money Box that any customer missing a single payment faces invalidating their 0% balance transfer.
Nick White, head of personal finance at the price comparison website uSwitch, said
not only are the card companies imposing late payment charges more rigorously, but services that were free until recently are now costing money.
"We are seeing more and more balance transfer fees introduced. Virgin is the latest," he said.
"This effectively means that instead of facing no charge for the service you will have to pay a fee. That is capped at £50 in most cases, but it still does add considerably to the cost of moving a balance from one card to another."
Meanwhile, Mr White said there are other ploys to try to tempt customers who take 0% balance transfers into spending on their cards.
"Many credit cards now are actually offering other incentives such as vouchers to spend in various stores. You earn points, you earn air miles," he said.
"It is an absolute no-no, because when you make repayments [they] firstly come off your 0% balance, and the amount you spend is left on the card and will accrue interest at that higher rate."
Customers wanting to avoid a late payment charge are advised to set up a direct debit to their bank account each month to clear at least the minimum payment.
BBC Radio 4's Money Box was broadcast on Saturday, 3 September, 2005 at 1204 BST.
The programme was repeated on Sunday, 4 September, 2005 at 2102 BST.