Monthly credit card fees in the United Kingdom soon could become commonplace. Egg, a UK-based Internet bank similar to ING Direct, over the weekend announced the launch of the Egg Money World MasterCard, which comes with a monthly fee of 1 UK pound (US$1.61 or 1.16 euros). Some industry analysts believe other UK credit card issuers will follow Egg's fee structure. "This is only the tip of the iceberg," Peter Harrison, a credit card analyst at moneysupermarket.com, wrote on the Web site over the weekend. "We are likely to see more providers follow suit as they try to claw back to profitability." The additional fee actually may help both credit card providers and consumers, contends Megan Bramlette, London-based managing associate at Auriemma Consulting Group. Currently, average portfolio charge-off rates are exceeding 10% in the UK, Bramlette says. A recent Auriemma survey of 503 UK credit card users found 40% of respondents reported spending less with their credit cards, and 20% have less card debt than they did a year ago. Additional fees may force consumers to abandon using credit cards, and that may help reduce issuers' charge-off rates, Bramlette says. "Lenders are becoming more stringent," she says. "The table is being set for credit card use to shift back to what is was like in the 1980s, when having a card was a sign of affluence." Credit cards with annual fees will become widespread by the end of 2010, Auriemma predicts. Cards without annual fees will not offer rewards and will feature basic benefits, Bramlette says. "What we're going to see is issuers offering tiered cards in the market," she says. For example, Marks & Spencer, a popular UK retailer, offers a no-fee card that gives cardholders one point per British pound spent in the store. Cardholders enrolled in the premium club pay a monthly 10-pound fee, but they receive free vouchers for coffee from the in-store café, complimentary family travel insurance and three points per pound spent in the store.

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry