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Product category: General insurance
News Release from: uSwitch | Subject: Banking
Edited by the Insidemoneytalk Editorial Team on 23 February 2007

uSwitch: Lloyds move to implement GBP35
fee for credit card customers

Lloyds latest move to implement a GBP35 fee for credit card customers that 'display low usage' is set to generate a total income of GBP1.79 million1.

Nick White, Director of Financial Services at price comparison and switching website uSwitch.com comments: "It has been a turbulent week for banks with continued rumblings that free banking could soon be a distant memory for consumers Lloyds TSB's latest move sends alarm bells ringing and indicates that consumers may also lose the luxury of fee-free credit cards in the very near future.Lloyds TSB has stated that this fee will apply to just 1% of their credit card customers that 'display low usage' but refuse to confirm the criteria used to select these customers

With a market share of 7.3%2 of UK credit card customers this will impact just over 51,0001 customers and generate an income of GBP1.791 million in the next month alone.

"Lloyds has confirmed that this is a one off move and this will not be repeated again in the near future.

I find it difficult to believe the issue of 'low usage' credit card customers will be resolved by one mailing and that this will not be an ongoing initiative as customers that are active now may not be in six months time.

"The concept of charging inactive credit card customers a fee to encourage them to either close down their card or start to use it more frequently doesn't seem totally unreasonable but the fact that this charge is being implemented without being open and transparent about what customers it will affect indicates that they might just be picking out customers that do not make enough money for them.

This might include the customers that pay their balance off in full every month.

"This will certainly open the floodgates for other credit card providers that are still desperately trying to claw back the lost revenue following the OFT's reduction of penalty charges last year.

The worrying thing is, where will this end? MBNA has just decided to charge customers GBP10 if they have an in-credit balance on their credit card.

Will the 59%3 of credit card customers that pay their bill off in full every month be penalised next as they are not as profitable as customers that make minimum repayments every month? "Lloyds TSB has written to customers this month and claims to have given them 30 days notice which the Banking Code stipulates is the minimum notice required for credit card providers to inform customers of changes to the terms and conditions on an existing product.

Lloyds TSB are offering customers that begin to use their credit cards again a three month 0% APR on new purchases until May 2007.

"More now than ever before, consumers should be keeping a very close eye on the small print and the correspondence they receive from their bank.

With the impending OFT investigation into current account charges, banks will continue to claw back any lost revenue streams in anticipation of the outcome of the investigation.

By voting with their feet, customers can make sure they are not being ripped off by underhanded revenue generating tactics which simply add to profits." For more information visit www.uswitch.com or call 0800 093 06 07.

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