Credit card interest rates.

ne1l

Hi all.

Both myself and my partner have in recent days received letters concerning our interest rates on our credit cards and how from a near future date our current interest rates will now be linked to the Bank of England base rate (currently 0.5%). So from now on my interest rate will be 19%+ base rate. I think this is slightly sly by my bank as my rate was never reduced during the fall to 0.5%, however, now has been as the only way it is likely to go is up but that is a argument for another day.

My question is,however, is this.......

Will any new interest rate, if the base rate rises, only apply to any new purchases on the card from the date where i switch to the new rate calculation or apply to the full balance of the card from previous purchases?

YorkshireBoy

ne1l wrote: »

Will any new interest rate, if the base rate rises...apply to the full balance of the card from previous purchases?

Yes.........

ne1l

YorkshireBoy wrote: »

Yes.........

Thanks for the reply. In my terms and conditions of the card it states that each payment made to any outstanding balance would be used to pay off those purchases that were made at the highest interest rate first. I understood this to mean that I'd only pay the interest rate on any amount at the rate it was borrowed at until it was paid off e.g if I borrowed £100 at 15% and £100 later at 17% later I'd continue to pay 15% on the first £100 until I'd paid that amount off rather than 17% on the second £100 and 17% on any of the initial £100 still outstanding.

This is why I am confused as to where any future rate rises will only apply to new purchases? I've also been offered the opportunity to reject the rate increase and simply pay off the outstanding balance at it's current rates but won't be able to use the card anymore. This is why I am a little confused.

Thanks for the advice so far. Much appreciated.

chistery

ne1l wrote: »

Thanks for the reply. In my terms and conditions of the card it states that each payment made to any outstanding balance would be used to pay off those purchases that were made at the highest interest rate first. I understood this to mean that I'd only pay the interest rate on any amount at the rate it was borrowed at until it was paid off e.g if I borrowed £100 at 15% and £100 later at 17% later I'd continue to pay 15% on the first £100 until I'd paid that amount off rather than 17% on the second £100 and 17% on any of the initial £100 still outstanding.

This is why I am confused as to where any future rate rises will only apply to new purchases? I've also been offered the opportunity to reject the rate increase and simply pay off the outstanding balance at it's current rates but won't be able to use the card anymore. This is why I am a little confused.

Thanks for the advice so far. Much appreciated.

No, your interest rate is variable and applies to the whole balance, except where promotional offers have been used, such as a 5% for 6 months. You'll pay off the higher rate transactions first, then the ones with 5% next.

If your rate does increase then yes, you can reject the rate, it'll stay on the current rate and you just pay it off as usual but be unable to use it for anything else. Once you pay it all off the account will be closed.

ne1l

Thanks. Cleared up the confusion.