'Sharp rise' in credit card fees

There have been large rises in charges for withdrawing cash, using cards abroad and balance transfer fees.

Headline interest rates have been hit less hard, meaning some consumers may not be aware of the changes.

The changes come as card providers react to the continuing turmoil in the international credit markets.

"It seems as if the credit crunch is beginning to cause credit card chaos," said Esther James, credit card analyst at Moneyfacts.

"One hundred and twenty five fee and rate increases inside two months is quite staggering."

"These fee and rate increases are less in the public view, and often tucked away in lengthy terms and conditions. However they can still make a substantial increase to the cost of using your card," she warned.

CREDIT CARD FEE INCREASES

• 69 cards increased cash withdrawal fees
• 25 cards increased cash withdrawal rates
• 18 cards increased foreign usage charges
• 10 cards have higher balance transfer fees
• 13 cards have increased purchase rates

A dozen providers have increased the fee levied on customers who use their credit card to withdraw cash. The biggest rise came from Alliance and Leicester, whose fee rose from 2.25% to 3%.

Customers of Smile faced the largest jump in the interest rate charged on cash withdrawals. Cardholders who have the bank's Gold Visa credit card will now be charged 23.9%, an increase for some customers of 9%.

Cardholders of Smile's parent company the Co-operative Bank now face the same rate.

Meanwhile, the AA, Bank of Scotland, Britannia Building Society and Intelligent Finance have all increased the commission applied to foreign transactions from 2.75% to 2.95%.

Alliance & Leicester also increased its balance transfer fee from 2.25% to 3%. Royal Bank of Scotland and Tesco will now charge 2.5% to accept balance transfers, up from 2%.

Lenders are responding to a number of factors, according to Phil Middleton from Ernst and Young.

"People are looking far more at the cost of credit and that is therefore reflected in the charging structure"
Phil Middleton, Ernst and Young

"It's a combination of the overall economic environment, the particular conditions which pertain in the credit markets as a whole, regulatory pressure and consumer pressure.

"The net effect of all that is that people are looking far more at the cost of credit and that is therefore reflected in the charging structure.

"Like anything else, credit has a cost, and depending on how risky you are perceived as being, you have to pay one way or another."

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