Credit cards described as ‘public enemy number one’

USERS have been warned to be aware of hidden fees when it comes to choosing a credit card –described by a consumer expert as “public enemy number one”.

Late payment fees can range from €7.50 with Bank of Ireland to €15.24 with MBNA, EBS and Postbank.

An over-credit limit fee can also vary from €6.25 with Bank of Ireland to €12.70 with EBS and Postbank.

The higher fees also apply to GE Money’s card, which is administered through Debenhams.

Niall McHenry, managing director of Saveafewbob.ie, said: “Without question for those struggling with their finances, credit cards are public enemy number one. Unless you are extremely disciplined and pay by direct debit each month, you really should avoid using credit cards, many of which can charge interest rates of over 20%.”

The Consumers’ Association of Ireland (CAI), meanwhile, said people should be aware how easy it is to switch from one credit card to another.

It also said borrowers who paid off the minimum amount every month also needed to act as they will see their debt grow larger as a result of hikes.

CAI chief executive Dermot Jewell said: “There are too many of us who are not actively taking advantage of better competition and better value.

“I have always argued that consumers are neither stupid nor naive and that, given the opportunity, they would ensure that only those who appreciated and rewarded their custom would ultimately benefit from what would be a fair market with good products at affordable prices,” he said.

The Financial Regulator said credit cards, if used wisely can be one of the cheapest sources of credit available.

If a bill is paid before the due date there will be no charge. This is called the “interest-free period” and varies from one credit card provider to another but is generally about 56 days.

Most providers do not offer an interest-free period for cash withdrawals however.

“If you only pay off the minimum repayment it will mean you will pay more in interest and the amount you owe will stay high unless you start to make larger regular payments to reduce it,” said the regulator.

Credit card users must be aware that if they pay off their bill they could be charged interest on all of their purchases from the day they bought them.

For example, if your statement shows €1,000 is owed and €900 is paid by the due date, most providers will charge interest on the full €1,000 until the date the payment reaches the account.

Meanwhile, Irish Mortgage Corporation director Frank Conway said many people are using the savings they received on their mortgages to reduce debts.