Interest rates have gone down, but egg have put my interest rate up!

justruth

I have never missed a payment, I have never gone over my limit, I pay the minimum each month so they are making money out of me, but they put my APR up tp 19.9% from 16.9%.

I messaged them to complain and was not given a reason as to why. All I got was some generic bumf about them having reviewed my account on an individual basis and looked at my credit score (which is actually better than when I took out the card!) and that I had agreed to the terms that they could put up the interst rate when they wanted. Does this constitue an unfair term?

I think they did so thinking that as I only pay the minimum each month I would just carry on without thinking about it, well they are wrong and now instead of paying them off later I have them as my number 2 priority this year! Also several letters of complaint are on route to them!

IWantToBeFree_2

You signed a variable credit agreement, therefore its not an unfair term, they can do whatever they want. Credit card interest rates aren't linked to base rate...

Grade_A_Reject

Can you not balance transfer to a 0% deal elsewhere?

YorkshireBoy

First of all, there's no correlation between BOE/LIBOR rates and credit card APR's, the latter being based on a consumer risk assessment.

justruth wrote: »

All I got was some generic bumf about them having reviewed my account on an individual basis and looked at my credit score (which is actually better than when I took out the card!)...

They're referring to *their* scoring of you, not the worthless scores you can buy from the CRA's.

They take regular information from the CRA's (google "Experian customer indebtedness index (CII)" for further information), and look at the management of your account. You have a debt you can only afford to service at 2% per month...is the impression you're giving them.

...and that I had agreed to the terms that they could put up the interst rate when they wanted. Does this constitue an unfair term?

No.

I think they did so thinking that as I only pay the minimum each month I would just carry on without thinking about it, well they are wrong and now instead of paying them off later I have them as my number 2 priority this year! Also several letters of complaint are on route to them!

You're saying you were 'content' to pay 16.9% but not 19.9%? Isn't 16.9% high enough to spur you into action? Interesting comment about making it now your No 2 priority. What was your No 2 priority before?...and what's your No 1 priority?

wavefinder

jesus christ yorkshire boy! what a reply. talk about the season of goodwill!

justruth

YorkshireBoy wrote: »

First of all, there's no correlation between BOE/LIBOR rates and credit card APR's, the latter being based on a consumer risk assessment.They're referring to *their* scoring of you, not the worthless scores you can buy from the CRA's.

They take regular information from the CRA's (google "Experian customer indebtedness index (CII)" for further information), and look at the management of your account. You have a debt you can only afford to service at 2% per month...is the impression you're giving them.No.You're saying you were 'content' to pay 16.9% but not 19.9%? Isn't 16.9% high enough to spur you into action? Interesting comment about making it now your No 2 priority. What was your No 2 priority before?...and what's your No 1 priority?

Ah well thank you for clearing that up, however I do still think it is a bit harsh ramdomly whacking it up 3% however you look at it!

No 1 priorty is a debt that has an even bigger APR, as you may see from my signature it's a bit of an issue that I am working on, then there is a debt at 17.9%, clearly it was 2nd, now 3rd priority. Now that we have that settled, just how does putting up the interest rate increase my ability to service the debt? Are you perhaps then suggesting that they would prefer it if I was unable to pay? Incidently the increase occured the first month that I requested through the money manager to have a fixed repayment of £40 a month as the minimum stands around £36 (which they have failed to do). Why have this as an option if you then ignor the request?

Do you work for egg? Have I offended you with my criticism of their management of my account? If so I appologise for upsetting you but I still think it sucks.

I conceed that I have debt and that it is my fault for getting in debt and I am now working hard to repay that debt. It is worth noting however that I have not had a late payment since 2005, and in that year I only had 1. I have always repaid all my debt and continue to do so. So how do they score me based on my repayment history? (always paid and never over limit)? If they considered me such a risk why did they increase my limit only a few months ago? No it doesn't add up, does it really, they just assumed (rightly as it goes) that I wouldn't be able to simply wipe the debt out like that and as such they felt they could make more money out of me. The last bit is where they went wrong, as I would have paid more in interest in the longer term at the slightly lower APR while I paid off the other, than I will now i am going to pay it off quicker.

justruth

Grade_A_Reject wrote: »

Can you not balance transfer to a 0% deal elsewhere?

Thank you, this is something I am looking into, the balance was originally a balance transfer that didn't get paid off and has since rocketed, which is a situation I would prefer to avoid repeating. I am considering a longer life of balance transfer if one is available that would suit this and the other card.

justruth

IWantToBeFree wrote: »

You signed a variable credit agreement, therefore its not an unfair term, they can do whatever they want. Credit card interest rates aren't linked to base rate...

Thank you, ah well I still think it sucks and will clear the lot in no time!

CLAPTON

I think you shouldn't think about it so personally.

Only in exceptional circumstances will a 'real' person be looking at your account management... for the vast majority its a computer program that checks the a/cs.
Whilst in your case it may spur you to reduce the debt and so pay less interest (good for you) in many cases people will take no action.
So maybe wrongly or maybe rightly, in their commercial judgment they will make more money by increasing the APR.... whether its 'harsh' or 'fair' simply doesn't come into it.

And just one other thing, its best to apply the 'snowball' principle to your debts... all things being equal pay the minimum on each debt except the one with the highest APR.. on that pay as much as possible. In this way you will pay least interest and clear the loans the fastest.
try

http://www.whatsthecost.com/snowball.aspx

methusala_2

MBNA response to the APACS/BERR Credit Card Summit Announcement

Principles on risked based re-pricing & helping customers in financial difficulty (effective 1 January 2009)




Over the past couple of weeks, MBNA has been working with the Government and our industry groups on two initiatives:

1. To provide further help for customers who are in financial difficulty, and;
2. To put in place some principles - that all credit card companies agree to - about how we make changes to the standard interest rates on customers’ accounts, known as “risk-based re-pricing”

The Government and the credit card industry have jointly announced the outcome of our discussions. MBNA fully supports this outcome which we believe benefits our customers and our industry.
Further help for customers in financial difficulty
Where a “not-for-profit” debt advice agency e.g. Citizen’s Advice Bureau, The Consumer Credit Counselling Service (CCCS) has formally notified us that a customer is in serious discussion with that agency on a draft debt repayment plan, we will suspend collections activity whilst these discussions continue, as long as they are concluded within 30 days. Also, if progress has been made, we can extend this for a further 30 days.
Above all, we’d always say that if you are experiencing difficulties then the best thing to do is to talk to us because, if you don’t, then we can’t help.
Principles on risk-based re-pricing
The industry has developed these principles to cover the circumstances, alternative options, frequency and transparency of an interest rate increase. MBNA will apply them from 1 January 2009.

1. Where we increase a customer’s interest rate, we will provide him/her with options. These will always include the option to close the account and repay the remaining balance at the existing rate of interest, within a reasonable period, having regard to the existing level of minimum payments and the customer’s financial situation. Where we offer alternative lending products, we may also provide the option to transfer the balance to such a product at the existing (or lower) interest rate.
2. We will not increase interest rates in the following circumstances: •Where a customer has failed to make the minimum contractual payment requested on the last two or more consecutive monthly statements; or•Where an agreed repayment plan is in place in respect of the account; or•Where we have been formally notified by a not-for-profit debt advice agency that the customer is in serious discussion with it.
3. Provided a customer manages his/her account in accordance with the product’s terms and conditions we will not: •Increase interest rates within the first twelve months of a customer having a credit/store card;•Increase interest rates more often than six monthly beyond this period.
4. We will always give a customer at least 30 days notice of an increase in interest rates, so that the customer can make other arrangements, should they so wish.
5. If the customer asks, we will ensure that our staff are able to provide the customer with an explanation as to why an interest rate may have been increased.

THESE PRINCIPLES WILL COME INTO EFFECT ON 1 JANUARY 2009 AND WILL APPLY TO ANY INTEREST CHANGE NOTIFICATIONS AFTER THIS DATE

YorkshireBoy

justruth wrote: »

Do you work for egg?

Au contraire! You could say they work for me.

Have I offended you with my criticism of their management of my account? If so I appologise for upsetting you but I still think it sucks.

You haven't offended me at all. I haven't got the emotional connection you have with your problems, so I'm merely stating hard facts. I've given you two possible (probable?) reasons for the increase in your rate.

I've (in the main, and MBNA excepted...once) managed to avoid the sort of rate increases some people on here have reported by always (in the last 2 years anyway) paying a little more than their minimum payments on all my cards. This, I believe, has taken me off the 'watchlists', their list of revolvers who only ever pay minimum payments.

Did you google CII? It really is an interesting read and may explain why they've done what they've done...especially if you're maxed out on other cards? Start with this one...http://www.experian-da.com/web/news/articles/04-03cri_consumer_overindebtedness.pdf

One of the reasons lenders increase the APRs is because they perceive their capital itself to be at risk. In other words, they attempt to minimise their losses by increasing revenue streams.

If they considered me such a risk why did they increase my limit only a few months ago? No it doesn't add up, does it really...

I'd be putting this to Egg in my complaint letter (unless something has happened with your credit file in the interim?). Make sure you mention specifically the '5th principle' from methusala's post above.

Good luck (and, to appease 'wavefinder', seasons greetings )