UK Consumers Likely To Resist Potential New Credit Card Fees

LONDON--(BUSINESS WIRE)--Even as banks are trying to impose new fees, a recent head-to-head survey found that more than two-thirds of consumers in the United Kingdom would choose a credit card with low fees over one with an enticing rewards programme.

“By 2012, most credit card products will likely feature an annual fee of some size, a drastic comparison to today where only cards targeted at the most affluent consumers include annual fees. The onus will be on lenders to provide consumers with a high-value card in exchange for the fee.”

Of those surveyed, only 20% said rewards were the most important feature of their credit card. By contrast, 35% said that low fees were the primary driver of their decision to apply for a new card. An overwhelming majority, 68%, said they would prefer a card with no fees and a low APR even if it had a mediocre rewards programme.

The survey of 516 UK credit card users was conducted by Auriemma Consulting Group (ACG). The results were recently published in Cardbeat®, a syndicated market research service that focuses on the payments industry.

“UK consumers have clearly indicated that they place a premium on low-cost borrowing options, even at the expense of enticing rewards schemes,” said Megan Bramlette, managing editor of Cardbeat®.

The results of the ACG survey indicate that charging new fees or raising existing ones will be a tough sell to UK customers, even as the banks are increasingly desperate to impose them. Pressured by rising levels of bad debt and increased funding costs, lenders in the UK may soon have no choice but to impose some fees on credit card users to boost revenues.

Currently, less than 10% of consumers pay an annual fee on their card. Respondents to the survey said the annual fee was the one fee they would like to see eliminated over all others.

However, given the tough financial climate, ACG believes that once one issuer becomes the first to introduce fees across a majority of its card products, it’s likely that the rest of the industry will soon follow.

“We believe that the days of credit cards with no annual fee may eventually come to an end,” Bramlette said. “By 2012, most credit card products will likely feature an annual fee of some size, a drastic comparison to today where only cards targeted at the most affluent consumers include annual fees. The onus will be on lenders to provide consumers with a high-value card in exchange for the fee.”

About Cardbeat

Cardbeat is a syndicated market research service that tracks changes in consumer attitudes towards topics that affect the payments industry. Cardbeat provides subscribers with up-to-date, reliable data about what consumers are thinking, how they behave and what motivates them. Subscribers are able to suggest new survey topics, and the service is designed to accommodate new questions on short notice. Cardbeat, which will begin its 15^th year of publication in 2009, is published quarterly in the UK and monthly in the US by the Auriemma Consulting Group.

About Auriemma Consulting Group

Since 1984, ACG has offered comprehensive management consulting, consumer research, and industry roundtable and benchmarking services to the financial services industry. ACG clients include credit card issuers, commercial banks, auto and mortgage lenders, merchants, networks, and industry vendors. Areas of expertise include collections, operational effectiveness, customer service, risk management, alliance development, marketing, knowledge management, strategic planning, financial strategies, benchmarking and litigation support. With offices in New York and London, ACG offers actionable solutions to help clients make important business decisions to maximize their efficiencies and revenues.

For more information, contact Megan Bramlette at [phone] or [e-mail].