£35 charge for NOT using a credit card

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Lloyds TSB: Targeting customers who don't spend enough

Lloyds TSB is forcing thousands of its most prudent credit card customers to pay an annual fee of £35.

The fee will apply to around 50,000 account-holders who do not use their cards much, and pay off their balance in full each month.

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Credit card companies and banks regard customers who do not make much use of their cards as a drain on the business.

They have to be provided with statements and other material, but do not generate any income for the banks with purchases, interest on balances, and charges.

Banks are redrawing the rules for credit cards after they were forced to slash illegal and unfair penalty charges for those who miss payments.

The Office of Fair Trading told the industry last year to cut charges of around £25 to a maximum of £12 or face legal action.

The finance firms are retaliating £35 charge for not using a credit card by introducing fees and other methods, such as reducing the length of the interest-free period for card purchases.

The news comes 24 hours after the Daily Mail revealed the likely introduction of annual fees on current accounts later this year, when the OFT is expected to order banks to slash what it considers are illegal penalty charges on overdrafts.

The new chief executive of the Nationwide said a system of annual fees on bank accounts was the best way forward.

Graham Beale, who takes over on April 1, believes monthly fees on current accounts is the 'fairest' way to charge.

Lloyds TSB is the first of the 'big five' high street banks to impose an annual fee on customers. But the finance industry believes others will follow suit. Sandra Quinn, communications chief at APACS, the trade body for institutions delivering payment services, said other banks would not be far behind.

'This - the introduction of annual fees - is a natural outcome to the work the OFT did last year on default charges,' she said.

'If you have lost one area of income, all credit card issuers will be looking at other ways to get income.

'They are not charitable organisations. The message is either use your card or cut it up.'

The letter sent by Lloyds TSB to customers this week dresses up the introduction of the £35 fee as positive.

It states: 'So that we can offer you an attractive product now and in the future, we will be charging you an annual fee of £35.'

The circular gives customers ten days notice of the introduction of the charge on March 1.

One customer said he has cut up his card and closed his account.

Brian Harley, 48, an accountant from Boston, Lincolnshire, said: 'It was extremely irritating that they only gave ten days notice of the change. It was very much a case of like it or lump it.

'I've had the card for almost 25 years. I decided to use it less when they reduced the interest-free period last summer.'

Mr Harley said: 'The introduction of the charge will alienate customers, but I got the impression that Lloyds TSB doesn't much care about that.'

A Lloyds TSB spokesman said: 'This fee applies to just one per cent of our card base. It is predominantly targeted at people who don't use their cards. We want to encourage people to start using their cards.'

Asked if this was responsible, she said: 'Plenty of customers use their cards responsibly and responsibly manage their balance. This is not about encouraging customers to get into debt.'

 

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