Interest rate increases

yb202

Hi everyone. Can someone please explain to me how new interest rates are applied to credit cards. I started my credit card at just under 15% apr two years ago. It has gradually gone up to 18.9%. How did my bank come up with that figure? Can banks just increase the rate to anything they want? I haven't had any missed payments on my account but I am finding it increasingly difficult to reduce my debt with the rates increasing. I would really appreciate an explanantion as I would at least like to understand how this works and how far it could go.

NickX

yb202 wrote: »

Can banks just increase the rate to anything they want?

Yes than can.

It is known as a variable rate, and as such it can be varied as the bank sees fit. This is detailed in the Terms and Conditions.

There are many reports on here of people calling their provider up and requesting a lower rate and many have been successful.

Paul_Herring

yb202 wrote: »

Hi everyone. Can someone please explain to me how new interest rates are applied to credit cards. I started my credit card at just under 15% apr two years ago. It has gradually gone up to 18.9%.

Interest is calculated daily using the %age figure for that day. They'll normally specify a date when the new rate applies.

How did my bank come up with that figure?

They probably roll 1D6 and add that to the current rate

Can banks just increase the rate to anything they want?

Pretty much, yup.

I haven't had any missed payments on my account

Probably just as well. If you had it'd probably be even higher.

but I am finding it increasingly difficult to reduce my debt with the rates increasing. I would really appreciate an explanantion as I would at least like to understand how this works and how far it could go.

Have you considered moving the debt?

yb202

Hi , thanks for the reply. Cant move the debt as I keep getting rejected every 6 months and dont want to ruin my already "weak" credit history. I think my main problem is the fact that I move house practically every year as I am a student and teneant.

thriftymomma

IF you are managing your account well, ie no missed payments, it may be worth ringing and asking them to drop the interest. You have nothing to lose! Good luck x

HamiltonL

Sign of the times really. Variable rates going up across the board. Nothing personal, just the way it goes.

yb202

I guess thats just the way it goes then. I do have one more question though. Whats stopping my bank (and banks in general) from raising the interest to whatever they feel like. Is there a range they need to stick to, or some rule or regulation for variable interest rates?

Richard019

yb202 wrote: »

I guess thats just the way it goes then. I do have one more question though. Whats stopping my bank (and banks in general) from raising the interest to whatever they feel like. Is there a range they need to stick to, or some rule or regulation for variable interest rates?

As far as I know, nothing. I know MBNA are quite keen on 34.9% interest rates at the moment. They're quite sneaky with it as well. I had the card for years just paying it off whenever I used it. Earlier in the year I put a pretty hefty BT onto it at 0% to stooze . I've noticed they've increased my standard rate 3 or 4 times since I did (obviously it's not noticeable in my repayments until the 0% deal ends). I know the credit crunch is having an effect on rates but it seems a bit of a coincidence to me.

HamiltonL

Interest rate rises will go up depending on risk when they are reviewed. The real s****y maintainters get it upped at least 4% APR, and more. Good customers who keep their accounts in order I find are most likely to either have a small increase, or none at all, and even more likely to get special offers on the card.

clio

In the eyes of credit card companys what makes you a " sh***y customer and a good customer" for them to up the apr. If both keep there accounts in order as t &c's and make payments on time every time how do they work out the 2 different type of customer so they can raise the apr. does the customer who allways carrys a balance but chips away at it over the years get classed as being the "sh***y customer"

yorkshirekev

This is often the way. Sometimes they can scent blood. My Halifax Credit card of five years standing has gone from 16% APR to a massive 27.95% APR. Career difficulties post university have not helped this, neither has a poor credit rating.
With an outstanding balance of 5.8k you can imagine the interest is steeper than climbing up Everest. In truth though they want you to get into that situation. I can imagine the top execs rather envy Provident and the like being able to charge 100/200% interest.
Just got to get on with it and make sure that the money you pay them will be cleared as quick as you can. Got an apology today from them for repeatedly calling me. No cash though!!
They are not in business to be nice.