‘Low Usage’ Charges For Barclaycard Holders
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After the problems of Egg card users recently, Barclaycard has joined them in proving to be more awkward than their advertising blitzes let on. They are considering introducing a fee for customers who do not use their cards enough. If introduced, the fee could be imposed on ‘low usage’ customers, people who use their cards infrequently or not at all and could be as high as £20 a year.
Barclaycard is set to contact up to one million customers in order to try to persuade them to use their cards more and thereby avoid the fee. Other card firms will probably follow Barclaycard’s example, analysts said.
Barclaycard have said that fees would only be introduced as a ‘last resort’. ‘We will do everything we can to improve the deal we give people, encourage them to use our card, not someone else’s and avoid fees,’ a Barclaycard spokesman said.
‘As a last resort, we are considering a fee for a minority of customers that simply do not use their card,’ he added. Barclaycard would not say what customer behaviour would prompt them to define them as ‘low usage’.
Any introduction of a ‘low usage’ fee by Barclaycard would be a watershed for the industry. Barclaycard is by far the UK’s biggest card provider, with 9.8 million cardholders and about 15% of the total credit card market.
The move is part of a growing trend of credit card providers imposing annual fees and charging for switching debt from another card. In February, Lloyds TSB started to levy a £35 charge on 50,000 ‘low usage’ card accounts. At the time, like Barclaycard now, Lloyds TSB would not give a definition of what ‘low usage’ actually meant.
Nick White, director of financial services at uSwitch has been quoted saying, ‘given Barclaycard holds a market share of around 15%, it is likely we will see this trend spread across the entire industry. This is probably a good time for consumers to ensure they close down any accounts they no longer use,’ he added.
There are two interpretations of this kind of behaviour by lending providers. One is that the troubling times in the markets are causing them to tighten their belts in displays of responsible behaviour that will see them through the economic downturn. The other is that the companies are using market turbulence as a smoke screen to increase the cost of borrowing as a way of shoring up profits in a cynical display of opportunism.
I shall leave it up to you, dear reader, to decide which of these phenomena we are witnessing.
