Credit card annual fees loom on the horizon

by Richard Kilner

Story link: Credit card annual fees loom on the horizon

PricewaterhouseCoopers (PwC) has conducted an analysis in its annual report (Precious Plastic 2009) which reveals that although profitability in the UK credit card market has risen in the last year and a half (judged by net yields after charge-offs), in aggregate over the past 8 years it has fallen substantially.

The report also concludes that that recent increase is probably not sustainable.

Profitability in the market remains under pressure, despite recent large interest rate cuts generally not being passed on.

To cope with the difficult economic circumstances it may be the case that lenders begin to restrict zero per cent balance transfer offers, and charge annual fees on credit cards.

From 2000 to 2007 balance transfer offers became usual, and net yields fell as competition became heated.

In addition to this, the PwC Credit Confidence Survey has shown that 25% of consumers expect some difficulty in paying back their debt and payment protection insurance sales could fall should a Competition Commission plan to limit its sale come into force.