Have costly credit cards exceeded their limits?

Credit-card companies, which are already reeling from reports of new-year teething problems with the new Chip and Pin system, this week came under fire for excessive charges from two consumer champions, moneysupermarket.com and Which?.

Credit-card companies, which are already reeling from reports of new-year teething problems with the new Chip and Pin system, this week came under fire for excessive charges from two consumer champions, moneysupermarket.com and Which?.

Which?, formerly the Consumers' Association, claimed: "Unless you pay off your bill in full every month, you could be paying through the nose for your piece of plastic - and probably not in ways you'd expect."

The report says that credit-card companies boost their profits by selling expensive and sometimes inappropriate insurance, which is supposed to cover you if you can't make your payments. They also charge customers a total of £400m a year for paying bills late or overspending.

Moneysupermarket claimed that free 0 per cent balance transfers on credit cards could soon become a thing of the past. Royal Bank of Scotland's Mint card has just introduced a fee for balance transfers, following similar moves by Barclaycard and MBNA.

Stuart Glendinning, moneysupermarket's director of credit cards, said: "It could be that the days of long 0 per cent balance-transfer deals without a fee could be numbered. Providers will be looking at ways to avoid losses accruing from customers who move their debt from one card to another without using the card for purchases."

Charging a fee on balance transfers is being seen by the banks as one way of recouping losses, because so many cardholders are simply not spending on new cards that make this offer. Moneysupermarket says that Halifax One Visa is the best card for fee-free 0 per cent balance transfers.

Sandra Quinn, spokeswoman for Apacs, the banks' trade body, said: "That's fair comment. Balance transfers are one of those thingsbanks use every so often, depending on whatever the current trend is. There will be another offer coming along, because the banks want to recruit and keep customers."

However, Ms Quinn was less happy with the criticism from Which? "If they had issued that report 18 months ago, I would have understood it," she said. "They haven't taken into account any developments since then - summary boxes, guidelines on issuing credit-card cheques and raising credit limits. If you don't want anything to do with credit cards, opt out."