In the last three months, dozens of credit cards have increased their interest rates. Is yours in our Hall of Shame?
Bad news for borrowers: interest rates are going up -- and that's official.
As you're probably aware, the Bank of England raised its base rate from 4.50% a year to 4.75% a year last month. Since variable-rate mortgages are linked to the Bank's base rate, millions of homeowners have seen their monthly mortgage repayments rise over the last six weeks or so. Perhaps now would be a good time to remortgage, before rates rise again?
However, rates for credit cards don't normally move when the base rate changes, as credit-card companies prefer to keep them as high and stable as possible! Then again, according to new research from independent financial researcher Moneyfacts, credit-card interest rates have risen steeply in the last three months.
Credit-card issuers have hiked their rates in order to make up for rising bad debts and reduced revenues from fining borrowers who exceed their credit limits or miss or delay their monthly repayments. Earlier this year, the Office of Fair Trading rules that these penalties were excessive and suggested that card issuers reduce them to a maximum of £12.
Hence, in a predictable knee-jerk reaction, the banks have struck back by raising their lending rates. In total, nineteen different card providers have increased the standard interest rate charged on purchases on 25 different cards. Furthermore, since July, 26 cards have increased the rates charged on cash withdrawals, which are already sky high. (Stick to withdrawing cash using your debit card, because getting cash from a credit card is always a bad idea!)
Here's a list of the higher rates, courtesy of Moneyfacts:
Recent changes to standard interest rates for purchases
Card issuer | Card name | Date of change | Rate increase | New rate |
|---|---|---|---|---|
American Express | Platinum Amex | 10 July | 6% | 14.9% |
Capital One | Classic Visa | 16 August | 5% | 34.9% |
Citi | Platinum | 4 September | 1% | 16.9% |
Co-operative Bank | Platinum Tracker | 4 August | 0.3% | 9.1% |
Co-operative Bank | Gold Base Rate Visa | 4 August | 0.3% | 9.2% |
Egg | Visa | 8 September | 1% | 16.9% |
Egg | Egg Money MasterCard | 8 September | 1% | 7.9% |
Halifax | Balance Transfer MC/Visa | 9 July | 5.4% | 15.9% |
Halifax | Platinum Balance Transfer | 9 July | 5.4% | 15.9% |
HSBC | Bank MasterCard | 1 August | 1% | 15.9% |
Lloyds TSB | Gold MC/Visa | 10 July | 2% | 17.9% |
Lloyds TSB | Rewards Amex Tier 2 | 10 July | 2% | 17.9% |
Lloyds TSB | Rewards Amex | 10 July | 1% | 15.9% |
Lloyds TSB | Platinum MC/Visa | 10 July | 1% | 15.9% |
Morgan Stanley | Buy and Fly! MasterCard | 6 September | 1% | 16.9% |
Nationwide BS | Classic Visa | 1 August | 1% | 15.9% |
Nationwide BS | Classic Visa | 24 October | 2% | 17.9% |
Nationwide BS | Gold Visa | 1 August | 1% | 15.9% |
Nationwide BS | Comic Relief Visa | 1 August | 1% | 17.9% |
NatWest | Airmiles MasterCard | 1 September | 2% | 17.9% |
Northern Rock | Base Rate Visa | 8 August | 0.3% | 9.1% |
Smile | Classic Visa | 21 August | 3.1% | 16.9% |
Smile | Current Account Customer | 21 August | 3% | 13.9% |
Smile | Gold Visa | 21 August | 1.1% | 14.9% |
Yorkshire BS | Base Rate Visa | 4 August | 0.2% | 10.7% |
As you can see, the rate hikes vary from a modest 0.2% APR at Yorkshire BS to a whopping 6% APR for Platinum Amex credit-card holders. Overall, the average rate hike across all of the 25 cards listed above is 1.924% APR.
Recent changes to standard interest rates for cash withdrawals
Card issuer | Card name | Date of change | Rate increase | New rate |
|---|---|---|---|---|
Barclaycard | Simplicity Platinum | 1 August | 12.1% | 27.9% |
Capital One | Classic Visa | 16 August | 5% | 34.94% |
Capital One | Platinum | 11 September | 4% | 25.94% |
Citi | Platinum | 4 September | 4.92% | 28.01% |
Co-operative Bank | Platinum Tracker | 4 August | 0.28% | 9.11% |
Co-operative Bank | Gold Base Rate Visa | 4 August | 6.71% | 11.3% |
Egg | Visa | 8 September | 2% | 22.9% |
Egg | Egg Money MasterCard | 8 September | 1% | 7.9% |
First Direct | Gold Card Visa | 1 August | 2.5% | 21.9% |
First Direct | Classic Visa | 1 August | 1.2% | 24.7% |
First Direct | Credit Card Visa | 1 August | 2.5% | 21.9% |
HSBC | Bank MasterCard | 1 August | 3.5% | 21.9% |
HSBC | Morrisons Visa | 1 August | 1.09% | 23.6% |
MINT | MasterCard/Visa | 1 September | 5.51% | 24.94% |
MINT | Gold MasterCard/Visa | 1 September | 5.51% | 24.94% |
MINT | Platinum MasterCard | 1 September | 5.51% | 24.94% |
Nationwide BS | Classic Visa | 24 October | 3% | 21.9% |
Northern Rock | Base Rate Visa | 8 August | 0.3% | 9.1% |
Smile | Classic Visa | 21 August | 3.7% | 19.9% |
Smile | Current Account Customer | 21 August | 4.7% | 16.9% |
Smile | Gold Visa | 21 August | 1.7% | 17.9% |
Smile | Current Account Customer | 21 August | 0.7% | 12.9% |
Ulster Bank (NI) | MasterCard/Visa | 1 September | 0.64% | 22.34% |
Ulster Bank (NI) | Gold MasterCard/Visa | 1 September | 0.59% | 19.29% |
Virgin Money | MasterCard | 1 July | 4% | 24.9% |
Yorkshire BS | Base Rate Visa | 4 August | 0.2% | 10.7% |
Again, there is a huge difference in the size of these rate hikes, which range from 0.2% APR at Yorkshire BS to an incredible 12.1% APR at Barclaycard. Overall, the average increase is 3.186% APR, which is far in excess of the Bank of England's base-rate hike of 0.25% a year. Ouch!
Naturally, this is bad news for credit-card customers who don't pay off their bills in full every month, especially those who pay only their minimum monthly repayments. Rather than put up with these rate hikes, my advice would be to transfer your debts to a 0% credit card and enjoy interest-free credit for up to a year. You have nothing to lose but your rip-off rates!
More: Use the Fool to find table-topping credit cards, mortgages and personal loans!