Consumers lose millions in bank charges
The bank accounts of UK consumers suffered losses to the tune of £553m in 2005, resulting in calls for people to monitor their finances more closely. Pauline McCallion reportsThis figure seems colossal and brings to mind recent reports of card skimming or identity fraud. However, it is not a result of financial theft but actually down to penalty fees and charges for late payments on credit cards and loans. So it seems consumers only have themselves to blame. Sean Gardner, chief executive of MoneyExpert.com – who carried out the study with financial research firm Defaqto – branded the figure “staggering” and attributed it to busy lifestyles with no room for financial planning.
The main contributors to the bill were penalties such as late payment fees on credit cards, overdraft charges, mortgage application fees, early redemption penalties on loans and cashing in savings accounts early, according to the research.
David Lee, research director at Defaqto, says: “The high level of penalty fees paid out in the past 12 months shows there is a real need for financial education. Many of us end up paying fees because we fail to understand the terms and conditions of the products we take out.”
The research found 38% of adults aged 18 and over plan to review their finances in 2006, after an average of £70.70 was paid out in fees last year by 7.8 million people. Approximately 11% of people paid charges for credit cards while 9% paid fees on current accounts. Mortgages, savings and loan penalties were paid by 1% of UK consumers each.
Gardner adds: “It is difficult for many time-pressured people to make the most of their money, research financial products and ensure they don’t fall foul of a minefield of costs and charges levied by providers. In our experience, many customers are crying out for a helping hand through the complex world of personal finance.”