Is credit card use going to change as a result of rate hikes ?

no_more_cards_for_me

There seem to be a lot of threads at the moment about card providers increasing their rates.

I've gone from somebody who borrowed (a lot!) on credit to someone who doesn't borrow at all. Whilst I use my credit card its settled each month so I never pay interest. Indeed the thought of paying to use a credit card makes no sense to me, I would rather use a cashback card and make a little something.

The punitative rates now being charged by some credit card companies are obviously seeing some users change card but is our love affair with the credit card coming to an end and will it encourage more people to borrow sensibly and not go into such extreme debt ?

Combined with sensible lending limits is this going to change the credit card market ?

Comments please

DUTR

I'm like you settle up each month, I have some savings which were put aside for an emergency, but the emergency has not arisen and the money could have paid off my mortgage, oh descisions descisions

spaceboy

Well I no longer use mine. I think clever people are paying it off in full or have stopped using it and be paying off their debt.

They are a complete con at the moment, only useful if you pay off in full each month.

tripled

People still take out store cards, so no I doubt it'll make a big difference, however people may have less debt as they find they start to struggle to pay sooner.

spaceboy

Store cards are the worst.

CannyJock

Unlikely to change it.

The views expressed on the forums aren't representative of the majority of customers. Look at the number of 1 post wonders who post their outrage then disappear. Most people (foolishly) accept there's a cost to borrowing on a card and get on with it.

Cards will charge as much as they can get away with, same as they've always done. Risk based pricing is just the current smoke screen to justify this.

What never ceases to amaze me is the naive expectation that some people have that financial institutions are charitable institutions who should listen to reason and common sense. They deal with hundreds of thousands of customers, they profile them, they increase rates, they apply fees, and they make profits to fund their next marketing campaign to attract more people.

Now I'm not supporting their behaviour. It's not reasonable or fair. But it is what it is. Speaking as someone who's put a lot of effort in over the years to understanding how these businesses work, it's remarkably easy to avoid these punitive fees and interest charges. You don't need to put in years of effort to learn these tricks, only a small amount of common sense:
1. Don't spend more than you can afford to repay
2. Make sure you pay your statement in plenty of time rather than trying to squeeze an extra couple of days out of them
3. If in doubt, phone them and ask when your payments due/what your interest rate is/when your 0% promotion ends

There will always be people who don't understand how money works. There will always be people who think they deserve something today and will get round to thinking whether they can afford it sometime in the future. We call them stupid. The card companies call them "revolving customers".

If history teaches anything, it'll be that the credit markets will relax coming out of recession, then greed will kick in again and people will get back into the same rut they were in before. This isn't the first recession in history remember, you only need to look back 20 years

I'd like to think most people who find their way to the site are all working to apply the whole moneysaving ethos to improve their situation, and learn from the mistakes of others so they can take advantage of these marketing offers and not become a victim of them.

CannyJock

spaceboy wrote: »

Well I no longer use mine. I think clever people are paying it off in full or have stopped using it and be paying off their debt.

They are a complete con at the moment, only useful if you pay off in full each month.

I don't pay mine off each month. And I'm always looking out for new ones. I'll be making over £2k profit this year from them.

no_more_cards_for_me

CannyJock wrote: »

common sense:
1. Don't spend more than you can afford to repay

Isn't that the problem - people borrow more than they can afford to repay and get into a cycle of debt.

A culture of minimum payments and not understanding how credit works - ie you have to pay it back !!

unidentified

Dealing with the providers when times were good was nice enough but now that things have turned sour because of the recession just shows how nice they really are as lenders with all these changes that there are.

Personally as soon as I can I'll be out of the credit card game.

Just to mention, although this isn't technically the first recession, credit cards play a more important role at this time than they did then as they're accessible to so many more people in society - thus why they've taken such a noticeable hit.

CannyJock

no_more_cards_for_me wrote: »

Isn't that the problem - people borrow more than they can afford to repay and get into a cycle of debt.

A culture of minimum payments and not understanding how credit works - ie you have to pay it back !!

It should be common sense. The people who get into serious debt with cards are oblivious to what they're spending money on - they just spend without a thought. They then blame the credit card companies for irresponsible lending.

There are some genuine people who are in proper financial hardship where a credit card is completely inappropriate for their needs. Hopefully they see the problems others have and avoid making the same mistakes.

chattychappy

I've not noticed any significant rate hikes.

During the "crunch" I stopped getting offers on existing cards for a while and a couple of cards did increase their standard rates slightly (eg 14% to 16% or thereabouts). Most didn't and I don't pay the standard rates anyway. Now it's pretty much back to where it was pre-crunch - BT offers and unsolicited limit increases.