Stop rate hikes on your credit card
Credit card providers can hike up rates on their credit cards at any moment. Here's how to stop them doing it to you!
You’re innocently and, as far as you know, correctly using your credit card when suddenly, you get a letter through the door. Your credit card provider has decided to punish you, out of the blue, by hiking up your interest rates by 10 percentage points. No explanation, no apology – and there’s nothing you can do about it. Right?
Wrong.
If you’ve ever received a letter like this, don’t just put up and shut up. Use these tips to fight back against the rip-off rate hikes!
1) Switch to a 0% balance transfer card
The easiest strategy is to take your custom elsewhere. Move your balance to either one of these market-leading 0% balance transfer cards, and you won’t pay any interest on your debt for 16 months:
|
Card |
Transfer fee |
Typical APR (when the 0% period ends) |
|
2.9% |
16.9% |
|
|
2.9% |
16.8% |
Read the longest new interest-free credit cards for a detailed breakdown showing which cards are better.
The only potential problem with this strategy is that you need a decent credit rating to get a 0% card (read 5 tricks to boost your credit rating for help on how to boost your score). If you don’t have one or if you get turned down, don’t despair. You have other options, too.
2) Stop using the credit card
Legally, you have the option to close your account down and repay the remaining balance at the existing rate of interest, within a reasonable period.
In other words, if you tell them you are going to stop using the card and want to repay the balance within a reasonable period of time, they cannot increase your interest rate!
What’s a ‘reasonable period’? The definition is very vague but the UK Cards Association (which is responsible with the wording of this rule) says providers will take into account the way you’re making repayments at the moment.
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So if you’ve only been making payments of £50 a month, it would be unreasonable to expect you to increase this to £100 a month. If, however, you’re paying off £100 a month every month like clockwork, it would be reasonable to expect you to continue to do this.
Even if you’ve missed payments or broken any rules, the lender cannot refuse to allow you to do this.
But please note: for this to work, you should inform them you want to close the account within 60 days of receiving the notification of the rate increase.
3) Kick up a fuss
If you cannot afford to keep making the monthly payments you did in the past to pay off the debt and you don’t qualify for a balance transfer, then your final remaining option is to ‘kick up a fuss’.
By this, I mean:
- Demand that an explanation as to why the APR was increased. If you get a vague response or one that doesn’t make sense (such as your credit rating deteriorated, when it didn’t), you can complain to the Financial Ombudsman.
- Explain that you are struggling with your debts. Your credit card provider is not allowed to increase the rate for anyone who has failed to make the minimum repayments in the last two or more consecutive months. If you have managed to make minimum payments in the past but are worried you will not be able to do so in the future, seek help from a debt counselling charity such as Citizens Advice or the CCCS. If a debt charity tells a credit card company that you are in serious trouble with debt, then the company cannot increase the rate on your credit card.
Other rights you should know about
Your credit card provider is not allowed to make rate hikes in certain circumstances. Here are your rights:
- Credit card providers can only make rate increases in the first year that they informed you about in the terms and conditions when you took out the card. So lenders cannot increase your interest rate within 12 months you taking out the card – unless it’s a rate hike you already knew about, like taking you off a three month promotional 0% period and moving you onto the standard APR.
- Credit card providers can only carry out a single rate rise every six months. However, if you’ve failed to meet all the terms and conditions of the card – such as making every payment on time – then they can get away with it.
- Credit card providers have to give you at least 30 days’ notice of an increase in the rate, so you can make other arrangements if you wish to do so. Bear in mind your credit card provider may only inform you that you can close your account when the increase actually takes place, at which point you will only have 30 days left to do so.
Have you received a rate-hike letter?
If you have, I’d be really interested to hear from you. How the information was presented? Was it in the small print at the bottom? Was it clear you had 60 days to close the account and prevent the rate hike from happening? Please let us know using the comments box below!
Most Recent
Comments
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I have recently received two successive hikes from Mint (RBS - no surprise!) - I have never defaulted on payments, always paid on time yet they are making it very hard to pay back the debt by constantly raising the bar - surely it makes more sense to keep the rates 'reasonable' so that the debt can be paid back, at this rate they risk people defaulting and getting nothing (as per comment by Oasis Soup). Talk about squeezing us 'til the pips squeak! I have also had a rate hike from Santander, why I don't know, again I pay well over the min each month and don't have much outstanding with them. I was going to cancel the Mint card, but read that it could affect your credit standing for the future, so didn't do it. Is that true? Is the government or some official body going to tackle this outrageous rate hiking fiasco! The banks are in a win win situation.
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I received a rate hike from capital one in 2009 from a rate of 9.9% to 17.9%. Because of this, I decided to stop the credit and have continued to pay the minimum balance, which I will do until it is 0. Probably sometime in the middle of next year. Then to my surprise, my egg card which i use and repay on a regular basis upped their interest, and wait for it not only once but twice in the same 12 month period. I do tend to pay this card down and use it on a regular basis, I have had the card and never had any bad credit for many years (6/7 years). They have now decided to impose a rate of some 25.9% APR. I honestly think this is disgusting and am now looking to pay it down and cancel the card this month. I am very unhappy with the way Egg responding to my questioning regarding the two interest hikes, it was vague and unhelpful and provided no comfort/reasoning as to why this was being increased the first time, never mind the second time! Avoid Egg at all costs, they are prying on customers who do not constantly transfer to 0% credit cards. In my view they should be rewarding customers who are long term stable creditors. Not penalising them and forcing them to go elsewhere. I will not go back to egg for sometime and I also plan to write a letter to the ombudsman. Any help you can provide will be appreciated!
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Can someone explain why it it that, with interest rates at an all-time low, the credit card companies (aka the banks) feel it appropriate to raise their rates even further. The differential betwen their input cost of money (BOE or Libor?) and their chargeout rates must now be several multiples of what it was a few years ago. Same goes for mortgage rates. Maybe no surprise that the b**stards can still afford to pay outrageous bonuses to their senior execs and hooray henries - and that their financial performance is looking so 'good' so quickly. Where's the "fairness" that Osborne spoke of this morning while justifying child benefit cuts. I still remember income tax at 98% for top earners. I'm not suggesting a return to that generally, but in the current climate, applying it to high bank salaries and bonuses over a fair threshold (and to Fred the Shred's pension) would I think be a fair pay-back for them getting us all in the sh1t in the first place and then pouring on more as we are forced to pay for their past greed and incompetence.....
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06 April 2011