Finance Choices
Credit card interest rates climbing
Credit card companies are increasing their interest rates and cutting benefits - but it could be a good thing for consumers.
In the last two months the average interest rate charged by UK card providers has risen from 14.90 to 15.04 per cent.
This increase means that, as a whole, credit card holders are now paying around £78.3 million more a year in interest, independent comparison service uSwitch.com calculates.
But with profit margins being stretched ever-thinner by people switching balances between card providers, increasing rates is seen by some as a more ethical way of reclaiming profit margins than other tactics being used in the market.
"In many ways this might be what the market needs," said Nick White, uSwitch head of personal finance.
"If the whole market did this there would be an opportunity for banks to curb underhand practices and ultimately rely less on payment protection insurance sales and 'hidden charges'."
The Financial Services Authority, Which? and Citizen's Advice have all lambasted the sale of payment protection insurance recently - with Which? saying it is "expensive, gives limited cover, and can be useless for the self-employed or those on contracts".
Insurers reject these claims. With Stephen Haddrill, director general of the Association of British Insurers (ABI), commenting: "Payment protection insurance is a valuable product. Insurers and lenders are committed to driving up selling standards. We will look closely at the particular concerns highlighted by the FSA, and will discuss these with them, as well as discussing our own improvements."
In the last two months the average interest rate charged by UK card providers has risen from 14.90 to 15.04 per cent.
This increase means that, as a whole, credit card holders are now paying around £78.3 million more a year in interest, independent comparison service uSwitch.com calculates.
But with profit margins being stretched ever-thinner by people switching balances between card providers, increasing rates is seen by some as a more ethical way of reclaiming profit margins than other tactics being used in the market.
"In many ways this might be what the market needs," said Nick White, uSwitch head of personal finance.
"If the whole market did this there would be an opportunity for banks to curb underhand practices and ultimately rely less on payment protection insurance sales and 'hidden charges'."
The Financial Services Authority, Which? and Citizen's Advice have all lambasted the sale of payment protection insurance recently - with Which? saying it is "expensive, gives limited cover, and can be useless for the self-employed or those on contracts".
Insurers reject these claims. With Stephen Haddrill, director general of the Association of British Insurers (ABI), commenting: "Payment protection insurance is a valuable product. Insurers and lenders are committed to driving up selling standards. We will look closely at the particular concerns highlighted by the FSA, and will discuss these with them, as well as discussing our own improvements."
posted by Bruce Wayne at 8:00 AM
Credit card interest rates climbing
3 Comments:
I seem to remember in the middle 70's when banks were intsructed to restrict credit, then the proliferation of credit cards and instant credit was not as it is today. It would be interesting to see how a credit control policy could be implemented. To control domestic demand then direct control of credit card and other 'instant' consumer credit would need to be applied. In the 70's (memory a bit shakey here...) most consumer credit was supplied by banks on overdraft or personal loans which were easy to regulate. Credit cards did not account for much consumer borrowing. These days, credit cards amount for a far greater propportion.
I've just received an email from Egg - sent at 6:13pm today.
As of tomorrow the APR rate goes up, and afaik this is the only notification i`ve received of this change.
That`s less than 6 hours until it comes into effect, and i`m not impressed.
Should there be a statutory minimum notice period for changes of this nature?
According to egg's terms and conditions , Yes, so they are breaching them:
17.3 We may make interest rate changes or any other changes to this Agreement which are not to your disadvantage immediately and will tell you about them within thirty days after the change. These changes will be so notified by statement notice, letter, by sending you an e-mail, or separate
written notice.
17.4 Where the change is to increase the interest rate, provided you have repaid all amounts you owe us and have notified us that the increase in interest rate is the reason for doing so, you have the right to close your Account at any time up to 60 days from the date of the notice referred to in 17.3, so that the higher interest rate does not apply to your Account.
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