Credit

Credit card companies are trying to locate millions of pounds that have been lost due to bad debt and lost revenue after a cap was placed on penalty fees by the regulator. According to the comparison site Uswitch last year close to 2.5 million people were told that they would be charged a fee, have their credit limit cut, or have their account closed.

Out of all of these people 16% missed their payments or exceeded payments. The majority were labeled as ‘good’ customers because they were able to pay their bill in full each and every month. More than half of the people stated that they were making at least minimum repayments.

Uswitch said: “Credit card providers are taking drastic action to manage bad debt.The question is whether providers are simply trying to reduce risk and indebtedness, or whether they are just trying to filter out less profitable customers.”

Simeon Linstead, head of personal finance at uSwitch.com, said: “We’re not against credit cards providers curbing consumers’ spending if their debts are genuinely getting out of hand. However, credit card companies who are taking action to close down or make changes to customers’ accounts must be completely open about how and why they have selected those customers.”

According to APACs, the industry body for credit card firms, 21.4 million credit cardholders regularly or always pay their bill in full out of 31 million credit card accounts in total.

Mr Linstead said: “These customers are the least profitable for a credit card company to have on its books unless they withdraw cash, use their card overseas or get caught out by the order of repayments. They will not be contributing much to the £6.186 billion in interest made by the credit card industry last year.”