Penalty charges cost £700m

The consumer finance website claims that as banks will lose £300 million following a cap on charges, other fees such as increasing interest rates or balance transfer fees means there are new ways to get into debt.

Commenting on the losses banks face from lower penalty charges, Nick White, head of personal finance at uSwith.com, said: “They are unlikely to write off the additional £300 million a year generated by the old levels of default charges.

“With this in mind, consumers need to be even more alert when taking out a new credit card, that they don’t get carried away with the headline grabbing rate, as it’s the underlying charges that are a greater cause for concern.”

Action by the Office of Fair Trading this summer means that penalty charges were near-halved to £12, slashing the £679 million banks generated from such charges each year.

However, Mr White fears that this does not spell the end of consumers incurring credit card debt through fees and charges.

Some banks have already increased cash advance fees, changed orders of repayments and scrapped balance transfer caps, meaning that consumers could go into debt through ignorance to the new changes.