CONSUMERS who leave a balance of just 1p on their credit card could be charged interest of up to 10,000%, it emerged last week in the latest sign that banks are cracking down following the credit crunch.

Citibank will increase the minimum interest charge for its 900,000 UK customers from 50p to £1 in May. It means that a customer with 1p outstanding on their bill would be charged £1 – nearly 10,000% interest.

Most credit-card firms, including Halifax, Bank of Scotland, Intelligent Finance and Egg, impose a minimum 50p charge for customers who pay interest on their bills. If you have a small outstanding balance after making a payment the interest will be “topped up” to the minimum charge.

However, Barclaycard and Citibank charge a minimum of £1. Some, like RBS, which covers Natwest, and Virgin Money do not charge the fee.

Citibank, which is based in the US, was last month behind the Egg credit-card fiasco, where 161,000 customers were told their cards would be cancelled even though they had good credit scores. It prompted accusations that the bank was shedding unprofitable customers rather than those who posed a credit risk.

A Citibank spokesman said the increase in the minimum interest charge would effect less than 1% of its UK customers. It said you would need a balance of less than £70 to trigger the minimum interest fee.

Sean Gardner of comparison firm Moneyexpert said: “Minimum interest charges are commonplace, although the details are typically hidden deep in the terms and conditions of your credit-card application. In some instances you may not even be able to find out what the charge is without asking directly.”

Data from the Bank of England show that the average credit-card interest rate has increased to 17.67% from 16.98% a year ago. Last month RBS, which includes Natwest customers, increased purchase rates from 12.9% to 13.9%.

Tesco increased rates from 14.9% to 15.9% while ASDA raised from 16.8% to 17.8%.

Customers are seeing their credit limits cut by around 10% according to Steve Willey at Moneysupermarket.com.

The Coop said up to 50,000 of its customers had seen their credit limits cut this year, while Moneyexpert said 500,000 people a month were having card applications rejected.

Last week, some Halifax credit-card customers complained that their rates on purchases had increased by as much as five percentage points. Halifax said it only affected a few on “historic” rates.

Andrew Hagger of comparison firm Moneyfacts says the best introductory purchase rate is with the HSBC MasterCard with 0% on purchases for 12 month. It then charges a typical 15.9% rate.

Cards with the best standard rate include the Barclaycard Simplicity Visa with a rate of 6.8%. You will need to pay off your balance in full each month to avoid the £1 top-up fee.

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