One in five caught by penalty charges

One in five people had to pay a penalty fee or charge on a financial product last year, according to research published today.

Nearly eight million people paid fees and charges amounting to £553 million during 2005, the report by financial group Defaqto and website MoneyExpert found.

The main reason for incurring the fees, the research found, was late payment of credit card fees, while other charges included breaching overdraft limits and early repayment of loans or mortgages.

Sean Gardner, chief executive of MoneyExpert, suggested that the reason for consumers incurring penalty charges was because people did not have the time to look after their finances. He said: "It's therefore difficult for many time-pressured people to make the most of their money, research financial products and ensure they don't foul of a minefield of costs and charges levied by providers."

However, the research found that over a third of consumers planned to take more control of their finances in 2006. One in five said that they wanted to pay off loans, while 21% wanted to pay off their credit cards and 22% planned to reduce their debts.

(KMcA/GB)