CC interest tied to base rate - bankers win/win

gannett600

As noted by a recent RAND(Squawk) blog posting we see that Lloyds Bank Platinum CC has announced that their Credit card interest rate will be tied to the Bank of England base rate. This is a bankers win/win for the following reasons:

• CC interest rates never went down when rates went down.

• The BOE Base rate is as low as it is ever likely to get. The only way is up for CC interest now.
• This change bakes in future rates rises to contracts.
• The banks can now blame an external factor for future CC rate rises.

When asked why the CC interest rate was so high compared to he BOE base rate the standard reply was that the rate was based on the "risk" of the loan. The lie of this is that 5+ years of steady payments and never a default does not lower the risk.

BOE Base rates have been between 4 and 6 % per year are you ready for a CC interest rate of 5 % more that your already paying ?

What to do

• Call you CC provider and ask when the monthly interest rate will be changed to the base rate. IE 0.047 % per month.
• Check your APR+charges rate and find a new card.
• Pay off and rip it up.
• Post here the names of other CC cards jumping on this bandwagon.

Cheers Gannett

jen245

Or how about you pay your bill in full each month, and pay no interest at all?

ViolaLass

1. My bank pays me 3% on my money. Why should it charge you 0.047%?

2. If you want to borrow money long term, get a loan (which, as you have realised, will cost you less). Credit cards are intended for short term loans, hence the interest free period and subsequent high rate.

ILW

I never realised they anyone was forced to run up a CC debt. Interest is voluntary.

gannett600

> My bank pays me 3% on my money. Why should it charge you 0.047%?

Read carefully ViolaLass, the 3% you get is Per Year, the 0.047 % quoted is the current monthly BOE base rate. This post is not looking for sympathy re paying interest on CCards just wanted to point out this major change in CC terms and conditions.

The BOE base rate can change quickly ( recent performance is not an indicator of future changes ) so this change could bite in a hurry.

ViolaLass

gannett600 wrote: »

> My bank pays me 3% on my money. Why should it charge you 0.047%?

Read carefully ViolaLass, the 3% you get is Per Year, the 0.047 % quoted is the current monthly BOE base rate.

0.047 x 12 is still a lot less than 3.

indigo2_2

Many Lloyds credit cards are charging 20%+ yearly interest. As gannett600 quite rightly points out - 'the only way is up!' for the Bank of England interest rates. Lloyds is therefore craftily putting itself in an ideal position to raise their rates even higher and defer the blame. Debt free is, sadly not an option for many people who can find themselves in debt through no fault of their own. Redundancy / illness / low wages, which no longer keep up with inflation etc
Thanks gannett600 for pointing this out - it has confirmed my suspicions after reading the leaflet a few days ago.

chattychappy

Oh yeah, those naughty naughty nasty nasty bankers....

I'm also a victim of bankers:

1) A few days ago I drank a little too much and got a headache later. I'm sure all that cash got banked. Sneaky bankers profiting from my misery!

2) I tried to visit a certain restaurant in London a while back. Full of rich looking people. I'm sure most of them were bankers. I went hungry. Bankers have their snouts in the trough whilst others starve! Nasty beyond belief!

How many more examples do we need? They are just so nasty!

Cell

Some rather mealy mouthed responses here, especially the one about paying your balance off every month. If that was possible for everyone this forum would more or less shut down!

The point raised is a valid one, all be it that there is nothing that can be done.

It wouldn't be so bad if rate rises were linked only to bank rate. Then we'd all know where we stand. But risk based re-pricing still applies, so it's win win for the card suppliers. Additionally it means that they can increase rates without allowing customers to opt out as they can with risk based repricing.

So yes, it's sneaky, and it's been introduced at a time when interest rates (base) are about as low as they can go. One day, when rates are high and start falling then theoretically people will pay less. But you wouldn't put it past them to abandon the policy at that point. There's nothing to suggest they wouldn't.

CLAPTON

indigo2 wrote: »

Many Lloyds credit cards are charging 20%+ yearly interest. As gannett600 quite rightly points out - 'the only way is up!' for the Bank of England interest rates. Lloyds is therefore craftily putting itself in an ideal position to raise their rates even higher and defer the blame. Debt free is, sadly not an option for many people who can find themselves in debt through no fault of their own. Redundancy / illness / low wages, which no longer keep up with inflation etc
Thanks gannett600 for pointing this out - it has confirmed my suspicions after reading the leaflet a few days ago.

I'm curious

if some-one, for no fault of their own, is struggling to pay their bills how does paying additional interest help them?

Cell

You might well ask the same of the bond markets in relation to Greece and Italy.

The price of lending is linked to the perceived risk of default. Lenders have no morals and no concern for the welfare of people who voluntarily borrowed money. It's a business transaction, pure and simple.

The difference is that governments rarely pay more for loans that have already been taken out. Indivduals borrowing on revolving credit pay the new rate on past, present, and future balances.

Risk based re-pricing is a nasty tool though. It is unregulated and the companies are unaccountable. It's all done by computer and you can't find out exactly why it's happened. At least you have the option to opt out, but for some people, whether or not others look down on them from a lofty perch, such a disruption to their credit line can have disastrous consequences.