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- Short term gain - long term pain
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- Consumer tips for the credit crunch

As bad debt soars, UK credit card issuers are facing higher costs and lower revenues. To fight the ever-falling bottom line, credit card issuers are looking to increase the frequency and level of credit card annual fees; a decision that could be met with resistance from UK consumers.

Currently, roughly less than 10% of UK cardholders are paying an annual fee. However, some card issuer, sometime in the near future will implement annual fees across all of its products. When that happens, we should expect a domino-effect where the remainder of the card issuers will follow suit. By 2012 we could see high annual fees for pretty much all of the credit card products in the market.

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Implementing an annual fee on most credit cards in the market may cost some more than they think. If you hold more than one card, you would then face paying annual fees on each of your cards. If you hold many cards but don’t use them all the time, the annual fee movement would be a costly time.

A recent survey from Auriemma Consulting Group reveals that most UK cardholders place a much higher value on cards without annual fees than those with a robust rewards program. This is a sure sign that Brits are pinching every penny and then some. Annual fees are primarily used by credit cards issuers to help finance rewards programs. Cards that offer more enticing rewards programs are usually accompanied by annual fees. For instance, the BMI Plus AMEX credit card offers its users a generous Destination Miles scheme. Every pound spent on the card will earn the user 2 destination miles. These miles can be redeemed for travel, hotels etc… This card also carries a high Annual Percentage Rate as well as an annual fee of £60.00. Currently, one of the lowest interest cards is the Capital One Fixed Rate card (8.5% APR). This card offers no rewards or cashback facility; but is considered a more attractive card in the current market. So there is a straight forward tradeoff between annual fees and extra value (if that’s what you are looking for).

Raising current and imposing new annual fees will no doubt be a tough sell to an already disheartened credit card country. Credit card issuers know this. They will be faced with the onerous task of increasing and adding fees and keeping customers. To offset the looming annual fee mandate, credit card issuers will no doubt come up with ways to sweeten the rewards programs to offset the annual fees. Or simply by adding rewards programs to cards that currently don’t offer any.

Keep an eye on your current card(s):

• Watch out for any increase in fees (however small);
• Keep a look out for better credit card deals;
• Only choose a card with a rewards program is it offers something that is important to you;
• Keep an eye on your other credit card fees - fees for cash advances and using the card abroad could also go up in the near future.

Hot Cards:

Right now, there are cards that still offer a great interest rate without charging annual fees for rewards. If you are looking for a straight up low interest credit cards without the bells and whistles, you may want to look at:

• Capital One Bank: Fixed Rate Cards – No annual fee and an APR or 8.5% fixed for 44 months
• American Express: Gold Credit Card – No annual fee and an APR of 12.9%; and
• The Egg Money Credit Card – No annual fee and a 12.9% APR

To learn more on these cards and what they can do for you or if you have to transfer your balance to a cheaper card, visit our service.