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CREDIT CARD FIRMS TO FOCUS ON HIGH EARNERS

Credit cards with annual fees could become the norm again

BY LISA BACHELOR
The London Guardian

A return to the days when credit cards were status symbols brandished by the well-off could be on the horizon, according to a report published today.

Precious Plastic, an annual analysis of the credit card market by the accountancy firm PricewaterhouseCoopers (PwC), predicts that annual fees will become common in the future, that interest rates will rise and that wealthy customers will be expected to pay for their cards in exchange for benefits such as money off shopping.

Paying an annual fee was commonplace in the 1990s but, at the turn of the millennium, card providers started aggressive pricing such as zero and low interest rate offers. In this way, credit cards were positioned as a cheaper form of personal short-term borrowing than loans.

“We reached a point when more people had a credit card than didn’t and when the number who had more than one outweighed the number who had none,” Sandra Quinn of the UK Cards Association said. “That was when they [cards] stopped being a status symbol.”

But mounting bad debts and continued regulatory pressure increasing the capital requirements on card providers could result in a return to the days when borrowers were required to have a high income to get a card, according to PwC.

“Lenders will focus on [customers] that are the most profitable, rather than those that are in the most need of credit,” said Richard Thompson, a partner at PwC.

See Related: ECONOMIC CRISIS