By Graeme Strachan

CREDIT CARD holders who overstretch their spending limits are being punished by excessive penalty charges that cause even higher levels of debt, the Dundee Anti-Poverty Forum has revealed.

A spokesman said they were aware of plenty of instances in Dundee in which credit card users had been hit with a double whammy of charges even though they had not breached their credit limit in the first place.

Billy Derby said the cost of the reminder can put them in the red and trigger additional penalty fees averaging £30 per billing cycle until the account is brought within spending limits.

He said this can result in a ballooning balance that could be difficult to pay and added that there were “plenty” of people in Dundee who had fallen victim to the charges.

“When people get a credit card they often go out and spend close to their credit limit,” said Mr Derby.

“People are so glad to have access to a credit card, they are not aware of the repayments or that a reminder letter can cost up to that amount of money.

“We have seen plenty of instances in Dundee where the debtor is charged twice.

“When they are nearing their credit limit they are issued with a reminder letter, and often there is a charge for sending out that reminder, which takes them over the limit and they incur another charge.”

He added the cost of the reminder letter puts them in the red, meaning they have to pay more back, and often, that sees them hit with a penalty charge for a late payment.

Credit card issuers have been bumping up late fees and over-the-limit fees and shortening grace periods, making it tougher for customers to pay on time.

Spiralling levels of personal debt have left more than half the population of Scotland struggling under a mountain of personal unpaid bills, with hundreds of thousands consistently losing large sums of money in charges and late fees.

According to BACS, the UK’s automated clearing house responsible for direct debit and direct credit payments, 64% of Scots do not have their personal finances under control.

The Citizens Advice Bureau in Dundee dealt with over £2 million worth of debt during the last financial year. A spokesman for the Credit Care Centre gave advice on how to avoid credit penalties:

Use fewer credit cards. This way you won’t need to keep track of multiple bills or multiple credit terms.

Carefully read the fine print. Make sure you understand the terms and conditions of your credit card. Read any new or undated information that is sent to you.

Pay off your balance each month. If you are unable to pay the balance in full, try to pay more than the minimum balance. The sooner you pay off your balance, the more money you save in finance charges.

Prudently shop for cards. Credit card issuers will send you credit agreements. Use them to study and compare terms and conditions before you apply for credit.