The fate of fee-free credit cards looks increasingly grim, as Morgan Stanley becomes the latest in a growing line of card providers to introduce annual fees for its customers.
The firm announced last week that it would be implementing a new £20 annual fee for a "selection" of its Black card customers from June 1st. A spokeswoman said: "We have reviewed the spending patterns and repayment history of customers and as a result we have imposed the fee for a number of customers."
With the Office of Fair Trading's (OFT) crack down on penalty fees hitting their revenues hard, card providers are turning to monthly and annual fees in order to generate revenue from customers who maintain a positive credit balance avoiding interest on their repayments, and those who use their credit card very rarely.
The move by Morgan Stanley follows that of Co-operative Platinum Visa and Northern Rock Base Rate Visa, both of which implemented a £2 monthly charge (£24 a year) earlier in the year. Similarly, Lloyds TSB recently introduced a one-off annual fee of £35 for customers that do not use their credit card regularly. According to independent price comparison service uSwitch.com, the company generated an income of £1.79 million from these charges in one month alone.
Mike Naylor, a personal finance expert at uSwitch.com, said: “We are seeing an increasing number of leading credit card providers bringing in monthly or annual fees, which is of little surprise given that many are trying to find new ways to recover the £300 million of profits lost as a result of the OFT’s clampdown on default charges just over a year ago.
“We would not be surprised to see more credit card providers move to introduce fees, in particular monthly or annual fees, before the end of this year," he continued.
"As such, consumers should continue to keep a close eye on the small print and the correspondence they receive from their provider, and seriously think about switching away from those that do introduce fees for no added benefit.”
Currently, the card on the market with the highest annual fee is the American Express (Amex) Centurion card, or Black card as it is commonly known. Customers in the UK that own an Amex Centurion pay an annual fee of £650. In the US, the annual charge is $2,500 (£1,260), while in France, Italy and Spain, it is as much as €2,000 (£1,365) a year for the exclusive card.
The Amex Centurion card is available by invitation only to those who spend a minimum of $250,000 (£126,110) in 12 months on another Amex card, and maintain an excellent credit history.
Unlike the American Express Centurion card and other "black" cards which offer the most exclusive of privileges and services, the Morgan Stanley Black card is a regular credit card. It is typically offered to customers who have been rejected for the Morgan Stanley Platinum card. While both offer similar interest rates and facilities, the Black card has a significantly lower credit limit.
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