Banks seek alternatives to late payment charges

Samantha Owens, research editor at Moneyfacts, states that banks may increase interest rates or charge for current accounts, if and when they do lower fees as requested by the Office of Fair Trading.

“Banks will probably find another way to offset the cost of reducing credit card charges,” said Ms Owens.

“Some banks mentioned that if there was going to be a cut in credit card charges, they were going to start charging on current accounts so there wouldn’t be free banking anymore.”

Although Ms Owens claims that late payment charges acted as an incentive against people taking on more debt than they can repay, she believes that for people in debt the charges merely add to what they owe.

Barclays has already announced that it is to increase its interest rate to make up for the loss of earnings in a reduction from £25 to £12 in the late payment fee.

Although Ms Owens said she hoped that competition will force banks to rethink plans to charge customers more, she said that banks will find “some way” to offset losses by reduced charges for bad debt.