24 March 2006
Banks could attempt to pass costs on to consumers after a court ruled that credit card guarantees do cover goods purchased outside the UK, according to switching and comparison website uSwitch.com.
Yesterday, the Court of Appeal overturned an earlier verdict that had found credit card guarantees did not cover goods bought overseas.
The website said that the ruling could lead to a rapid rise in the amount spent on plastic abroad, which is predicted to reach £12.5 billion this year.
However, it also warned consumers that banks might attempt to claw back these costs through annual card fees and increased interest rates.
Nick White, head of personal finance at uSwitch.com, commented: "Despite this being a landmark victory for the OFT (Office of Fair Trading) on behalf of the 30 million credit card holders in the UK, the implications of this on the credit card industry and the knock-on effects to consumers will be considerable.
"However, in the long-run it is the consumer that will no doubt foot the bill of this added protection with 'hidden premiums' in the form of an annual fee, higher rates of interest or increased fees."
He also suggested that the matter was not yet closed.
"The impact on banks will be unparalleled and will hit their profits hard," he added.
"This issue has been strongly debated for several years and despite the court's decision this week, it is still open to statutory interpretation, and as such we expect banks to fight this all the way. We would not be surprised if this went before the House of Lords on appeal, until then, the outcome is uncertain."
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