Millions pay penalty charges

New research from financial groups Defaqto and MoneyExpert reveals that 7.8 million people were hit with penalty fees or charges for their financial products during 2005, with late credit card repayments the main cause of penalties.

It is estimated that a total of £553 million was paid out in penalty fees and charges during 2005 with 1.7 million people paying total fees of over £100 during the course of the year.

Sean Gardner, chief executive at MoneyExpert, suggested the reason for this high figure was because people are busy and don't have the spare time to manage their finances effectively. "It's difficult for many time-pressured people to make the most of their money, research financial products and ensure they don't fall foul of costs and charges levied by providers."

The research reveals that in past two years the average fee for exceeding the credit limit has risen 40% to £22. The fee for making a late payment or missing payment on a card has gone up 39% to more than £22.

The Office of Fair Trading recently ruled that credit card penalty charges are too high, but this is being challenged by the banks.