Lloyds upping the interest rate

DD265

I have a student credit card with Lloyds TSB. The interest (on purchases) is currently 19.9%. They've just informed me by letter that as of the end of June, it's going up to 24.9%.

The limit is £1000, and right now it's up at about £650. Mom owes me £90 of that (emergency vets bill). I have a cheque clearing for over £200 to set against it too. I am happy that I can clear the amount before the end of June. I have a £2k overdraft (interest free) and also a loan from the bank which is currently just under £3000. All of my accounts/debts etc (student loan aside) are with Lloyds TSB.

My plan was/is:

1. Clear the credit card
2. Keep the credit card there for emergencies (I'm good at not spending on it these days)
3. Clear the loan
4. Clear the over draft
5. Reduce the OD limit, keeping it there for emergencies*
6. Cancel the card
7. Build up some savings
8. Cancel the over draft.

I currently earn about £1250 a month before tax. I am not in a dire situation (meeting repayments and then some) but I am concerned about not having access to money should I find myself up the creek without a paddle. I own a horse and a car = potential for lots of emergencies!

Really my question is: should I be looking to keep this card (short term, say 2 years) or trying to find one with a lower interest rate? Or go for savings.. but then debt is costing me more right?

Edit - Lloyds have given me the option of closing the account and continuing to pay at the current rate of 19.9% (so I wouldn't need to pay it off instantly), or continuing on to the higher rate.

*As I have a graduate account, my overdraft is due to decrease by £500 every year. Whether the bank will let me have a higher limit (or whether I'll want one) remains to be seen. The next date for review is August 31st 2011.

BugsyBrowne

If you have a good credit rating ditch the Lloyds card and apply for another card simple..

Consumerist

Be careful not to accept an Arrangement to Pay (AP) unless you get a written agreement that it will not be entered on your credit file. There have been reports on these fora that APs have been entered on credit records even if such offers were rejected by customers. An AP on your file could damage your chances of future credit.

I agree that you should start looking for a new card ASAP. You would be well advised to check your credit file in few months to be sure Lloyds haven't made an AP entry.

Edit
Also be cautious about reducing limits. Prospective future lenders will not know whether you requested the reduction or whether the bank perceived you as a higher credit risk. Better to get a new card, if possible, with a lower limit.