Halifax rate increase - best option for me?

nicki_2

NOTE: Figures shown (excluding the rate increase) are based on my February 2010 statement before I made that months payment. I'm due my March statement sometime in the next week. Also I have a Natwest card whose APR is 24.9% and I use to make purchases over £100, always paying the minimum or £100 whichever is greater but is currently maxed out due to a necessary recent purchase.

I have a Halifax cc with a credit limit of £2850 and an APR of 16.94% variable, the current balance is £2700.59. I've only ever used it for balance transferring from my Natwest card.

Yesterday I received a letter from the Halifax stating that my compound interest rate is rising to 21.95% as of the date of my May statement. I apparently have two options, accept the increased rate or close my account and pay it off at the current rate. I can't move it as I'm maxed out on my other credit options (I've had a couple of years where I've had to replace a number of expensive household things!) which are both with Natwest and being on benefits I doubt I would be accepted for another card by anyone right now, especially at a lower rate.

If I was to close the account how would that affect my credit rating as I'd still have over £2,600 outstanding and by my calculations it will take me least another 2 years to clear it. Would it affect my ability to borrow if I need to?

Before anyone suggests I should get the interest frozen or right the debt off etc, I'm not going to do that. I got into this debt, its my responsibility to clear it, my income is about the same as it would be if I had a job paying minimum wage so I'm taking care of this myself. I'm not taking an easy route out or I will never learn my lesson and it won't set a good example to my daughter.

stephane_2

If you were going to accept Halifax offer to freeze the interest at current rate & close the account, you'll still be paying the minimum payment at least but it will show on your credit report as a running account so it will have no impact on your credit file

CannyJock

nicki wrote: »

Natwest (maxed) @ 24.9% APR
Halifax £2700.59 @ 16.94% APR

Close the Halifax account to freeze the interest @ 16.94% APR. It won't have any adverse affect on your credit report. Infact it won't show any flags at all on your credit report so long as you continue to make the minimum payments.

Pay the minimum on the Halifax card until the Natwest card is clear - because it's the lowest APR debt you have.

Pay as much as you can as often as you can to the Natwest card. Pay weekly if possible rather than waiting till the end of the month.

There's a trick you can use where you pay every penny (leaving enough for DD's and essential cash in your current account to your Natwest card, but also spend on the Natwest card. Your balance will still go down (so long as you control your spending) and you will save interest doing this.

Meanwhile, there's absolutely no harm in applying for a new 0% purchase card. Sure you might be refused, but what have you got to lose? One search every 3 months on your credit report won't make any difference, and can only work in your favour if you're accepted.

nicki_2

Thanks for the advice.

ATM every penny is going towards paying off my overdraft which is 19.25% APR and costing me £30ish a month (that should be paid off in just over a year) as the bank is concerned since I've been in it for over 3 years (when ex and I split and I was waiting on benefits kicking in etc I lost track of spending and just spent spent spent) Its also the smallest debt so I'm looking forward to the point in March next year when I briefly have "my own" money before going overdrawn again due to bills - that is also taking into account £20 a week extra spending during school holidays (which won't necessarily be spent so will only be withdrawn if needed), £50 to cover daughter birthday & new clothing due to her growing (I only buy sales items unless urgent) and £200 for Xmas (gifts, food, school photos, postage etc). Then I'll start on the Mastercard.

Looks like I'll be phoning Halifax tomorrow afternoon, right now I have a university assignment to get done before tomorrows deadline! :eek:

jacqui120d

Hi nicki. Just a thought, and I'm sure you've already explored this but just in case - I rang the Halifax to see if they had any offers for me as an existing cardholder. I was given two, either 0% BT for 6 months 3% fee (no thanks!) or 3.94% life of balance with 3% fee. I thought this was a great deal so took it there and then. During the conversation, the guy said my apr was going up to almost 28% next month for purchases - where's the sense in that? Academic I know as won't be spending on it now anyway. Just thought it might be worth a call. Good luck

jacqui120d

Oops, me again. Sorry, just re-read your post and what I've just said won't apply to you as your card is pretty much maxed. Apologies - I'll go to the back of the class