The wicked charges of charming cards

After that 0 per cent start on your plastic, you could be tripped up by high fees. But things are set to change, says Sam Dunn

Flexible friends" was the nickname given long ago to our credit cards. But now they can seem more like fair-weather friends, with whom we must stay on constant alert.

Flexible friends" was the nickname given long ago to our credit cards. But now they can seem more like fair-weather friends, with whom we must stay on constant alert.

Step past any welcoming 0 per cent introductory offer and you'll find yourself tangled up in fees, seesawing annual percentage rates (APRs), vanishing cashback, potential penalties and balance-transfer rates tied to onerous terms and conditions.

However, the Government is at least trying to stop us walking blindly into a trap. Changes to the Consumer Credit Act on 31 October will force lenders to muffle the 0 per cent credit deals screaming at us from adverts. Instead, we will be able to compare a single APR - the rate to which we are switched at the end of any introductory offer - calculated in the same way by every lender.

This figure will also have to be the most prominent part of an advert.

Barclaycard's latest deal shows how you need to keep your wits about you. After a three-month 0 per cent introductory offer, you'll switch to a much less friendly APR of 15.2. Transfer any balances and you'll also be charged a 2 per cent fee, capped at £35, although you'll get 0 per cent on the outstanding amount until 1 September 2005.

But watch out if you transfer more than £5,000: you'll then be charged 6.9 per cent on any amount above this, as well as the 2 per cent fee on the first £5,000.

Fay Hogg of card firm Mint believes consumers are slowly becoming more savvy about their plastic and know what they're getting into.

However, it appears we're not so alert to punitive penalties for mistakes such as late bill payments or spending that breaks through credit limits. "By and large, people are not aware of such fines. Most think that with a late payment, say, the credit card company will simply charge you interest on the amount," says Richard Mason of financial information website moneysupermarket.com.

This certainly isn't the case. As the table below shows, fines can be heavy and vary between providers. For example, Nationwide charges £15, while J Sainsbury has a £25 penalty.

While a one-off late payment won't hurt too much, the real damage is done to your credit reference, warns Mr Mason. "You may find you won't be able to manage your debt so easily through 0 per cent deals with lenders elsewhere."

Simply using a credit card at an ATM, both here and overseas, will also dent your finances. For example, use a Mint card to pull cash out of the wall on a UK high street and you'll be charged 15.2 per cent interest straight away - regardless of any 0 per cent deals - as well as a 2 per cent fee (or £2 minimum).

Overseas, a withdrawal with the same card will cost you 2 per cent (minimum £2) on top of a 2.65 per cent foreign currency loading fee.

For this reason, credit cards are often best used only in an emergency, although Nationwide's Cash Reward credit card carries no foreign currency fee anywhere in the world and has a lower 1.25 per cent withdrawal fee.

Other cards still carry a fee simply for keeping them in your wallet. For example, Citigroup charges an annual £25 for its AAdvantage Gold Visa card: the advantage is that you can build up air miles for travel on American Airlines.

The Co-op charges a one-off fee of £120 for its Gold Advantage Visa. A spokesman says the card offers a low APR (9.2) for those who don't want the hassle of constantly shifting their debt.

One way to take control of the costs is to build your own card. Insurer More Th>n and Accucard allow you to choose a higher APR, say, to benefit from a better cashback deal.