Small print = big profits consumers are fleeced for up to ?1 billion on credit cards

Interest free days cut by 11%:

In the last month, 30% of the credit card market (44 out of 145 cards) cut the interest-free period for new customers from 56 to 50 days - costing consumers up to ?3 million extra in interest payments.

Plastic fee-tastic: 91% of balance transfer cards now levy a fee compared with just 29%[5] in 2005.

These fees have soared by 373% from an average of ?11.02 to ?52.09 - with 7.9 million balance transfers carried out each year the cost to consumers is ?412 million.

Cash withdrawal fees rocket: In 2005, the average APR for cash withdrawals was 21.22% APR, today this has increased by 41% (8.75% APR) to 29.97%.

This facility costs consumers up to ?161 milliona year in interest.

Purchase APRs: 36% of credit card providers have increased purchase APR's in just over a year from an average of 16.4% APR to 17.7% APR costing consumers?481 million.

Evolution of introductory deals: Cards offering longer 0% balance transfer periods and shorter 0% purchase periods did not exist five years ago.

Today, they represent 83% of all 0% introductory offers.

Plugging the gap: The amount issued in unsecured loans plummeted by ?132 million in the last month, this is neatly mopped up by a ?130 million increase in credit card spending.

uSwitch.com's 2008 credit card market analysis shows that tweaking terms and conditions has generated up to ?1 billion for the credit card industry over the last year.

The current economic situation is the perfect climate to cultivate these subtle small print tweaks and suppliers feel confident to make these changes as credit hungry consumers are being forced to turn to them.

In fact, while credit card spending has rocketed by ?130 million, the amount issued in unsecured personal loans has plummeted by ?132 million, perfectly plugging the credit gap.

This suggests that credit card providers are tapping into a captive market with no-where else to go.

The 6 day interest-free disappearing act...

One of the latest money-spinning tactics, introduced by 30% of the credit card market during the course of the last month is the reduction of interest-free periods.

This has chopped the average number of days by 11% from 56 to 50.

Potentially, providers are set to gain 72 'interest-charging' days a year for every new customer, raking in up to ?3 million as a result.

For example, from the date of their last statement, an existing customer with one of these providers will still to have 56 interest-free days before their next payment due date arrives.

However, for new customers the payment due date will effectively be brought forward by 6 days, thus reducing the interest-free period to 50 days.

Plastic fee-tastic: Since their introduction four years ago, balance transfer fees have provided the means for providers to attempt to recover the ?600 million in lost revenue caused by 0% introductory deals around six years ago.

These fees serve to penalise savvy consumers who regularly switch to the next best balance transfer deal.

Balance transfer cards currently make up 76% of the credit card market and 91% now levy a fee compared with just 29% three years ago - just 10 credit cards offer a fee free transfer.

What's more, the average balance transfer fee has increased by 373%, from 0.59% to 2.79%, or in monetary terms, from ?11.02[ to ?52.09, and currently amounts to a staggering ?412 million in annual revenue for providers.

Summary of findings: Cash withdrawals: 7.3 million consumers have made an average of 5.2 credit card cash withdrawals each in both the UK and overseas totalling ?500[6].

This costs consumers ?22.07 each in the average billing period (56 days).

Three years ago, the same level of spending would cost just ?16.12 in interest over the same period.

By hiking rates by more than a third, this income has inflated by up to ?43 million since 2005.

Annual fees: Cards which carry an 'annual fee' offer consumers additional benefits such as airmiles, reward points, negotiated discount offers, and travel and lifestyle services.

The average annual fee for this type of card is ?95.82 - 82% more than the average fee in 2007 which stood at ?52.67.

These cards however, appear to have declined in popularity and currently only represent 8% of the credit market.

Balance transfer fee caps: The removal of caps on balance transfer fees has persisted over the last year.

Over 88% of these cards now levy unlimited fees, and the number of cards with capped fees has fallen by 70% - leaving just three in the market.

Life of balance: The number of these cards available peaked in 2005 making up 13.4% of the market, and has gradually declined to an all time low of 2.8% today.

Order of repayments.

Three out of four (74%)credit card providers clear the most expensive debt last - Nationwide and Saga are the only two providers that operate a fair order of repayments.

Number of credit cards available.

There were 116 cards in the market in July 2007 compared with 145 in September 2008, this is a 25% increase.

Evolution of introductory deals: Credit cards offering longer 0% balance transfer periods and shorter interest-free purchase periods did not exist in 2003.

Today, these deals represent 83% of all introductory offers, up from 63% since last year.

The most prevalent deal of this kind is now 0% on balance transfers for 12 months and 0% on purchases for 3 months, monopolising 30% of the market.

The biggest casualty of the 0% introductory deal has been those that offer 0% on balance transfers and purchases for the same period.

In 2003, all providers offered this type of deal - today these deals represent just 23% of 0% introductory offers.

Simeon Linstead, head of personal finance at uSwitch.com comments: "The credit card market is constantly evolving and even the savviest of consumers could be forgiven for not keeping pace with providers' tactical tweaks to terms and conditions.

However, providers count on the fact that their attempts to safeguard their margins through subtle fees and charge increases will simply be met with confusion and apathy - not action.

"As consumers are likely to only start feeling the full impact of the global financial meltdown in 2009, now is not the time to be naive when shopping around for a new credit or lethargic when it comes to reviewing existing borrowing.

It is vital that consumers give themselves the best possible chance of successfully repaying their debt in the tough times ahead by planning now to secure the best deals and products on the market.

Consumers must remember, the more money you spend on fees and charges, the less you are paying off the actual debt." For more information visit www.uSwitch.com or call 0800 093 06 07.not a supplier but acts independently, giving consumers an impartial view of what's on offer.

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