Why would they change my interest?

Catch22_2

Hi, I'm new here!

I have a credit card with HSBC and the balance is £420. It has a £500 limit and I've had it for a couple of years and not paid it off. Just because other things seemed more important, like reducing my overdraft!

But they wrote to me today and said that they are changing my interest and that this is because of 'several factors, including how you manage your credit and credit status'.

Could I have really damaged my credit rating by not paying it off?

I am now prioritising it - plan to pay it off at around £150 a month for the next few months.

But I am worried!

Horseunderwater

When you say you've not paid it off and concentrated on the bank overdraft, did you mean that you paid nothing at all to CC or just the minimum due. I believe that you may be able to refuse the new rate and insist on keeping on the old one, but you will have to sort your finances out and make cut backs on stuff and set up a proper budget. Could be things like not buying coffee and cakes from Coffee shops - taking a packed lunch to work - not buying from a shop. Buying basic foods and only then enough to feed yourself. I now fill the fridge for the week and on Friday it is 90% empty, so am now wasting very little bought food. I also bake cakes and biscuits and this too saves some cash.

Catch22_2

Thanks Horeseunderwater

I paid the minimum due (I have a standing order set up for that) and if I remembered or had spare cash I paid extra (like an extra 20) but the interest is quite high anyway.

The new interest rate doesn't start till May and with a bit of luck and no unexpected events I hope to have paid it off till then.

Your suggestions for saving are great though because I do fritter a lot of money away so that needs to stop right away! I spend a lot on rubbish like chocolate or a bottle of water from the petrol station etc.

I am in the process of writing my new budget out as I type! I feel really motivated after reading the forum for a bit.

thenudeone

If you want to keep the lower interest rate you need to write to them, rejecting the increase and agreeing not to put any new spending on the card. You'll also need to cancel any continuous payments.

This explains it:
http://www.moneysavingexpert.com/reclaim/credit-card-interest-rate-increases

Ben8282

Are you sure that refusing this interest rate increase thereby closing the account to further spending and maybe depriving yourself of your one and only credit card when you have a bad credit score and probably would have difficulties in getting a new one is really what you want to do?

The amount outstanding here is very small. Can't you pay it off and use the card for your purchases or something? This would improve things.

Catch22_2

I know I need to pay it off, I'm trying to pay off my OD a bit each month and also save a small amount each month too, so that's why I put the CC on the back burner. Bad financial sense I know because of the interest but I didn't think it would affect my credit rating.

I really badly want to do whatever I can to improve my credit score. I haven't had hardly any credit in the past apart from this one card, and another which I paid off and closed down years ago.

I think the way forward is to pay it off and then put a bit on and clear the amount each month. That is right isn't it?

I'm worried they might just take it off me when I clear the balance. Don't know why I think that they would, but do they ever do that?

Ben8282

They might take the card when you pay it off but so long as you don't actually do anything wrong such as miss a payment, make a late payment, go over your credit limit etc they probably will not.

If possible, when you get paid this month pay the card off in full and use it for purchases, paying off each month. If you transfer some of your cash spending to credit card for the month this should work.

Catch22_2

Hmm, I will keep my fingers crossed. If I pay it off quickly then it should hopefully make it obvious that I can handle it properly...

I had planned to pay it off over the next two months (I know it would be better to do it straight away but it feels like I'm giving them a lot of money if they are then going to take it away).

I'm planning to then pay for my petrol or something on it each month, and set up a standing order to pay off the full balance each month.

I hate credit cards!!

RadoJo

Catch22 wrote: »

I know I need to pay it off, I'm trying to pay off my OD a bit each month and also save a small amount each month too, so that's why I put the CC on the back burner.

There's very little point saving if you have debts - the interest rate on your credit card will be more than your savings (especially now!) so although it might give you a feeling of security to have savings, it's not really worth it.

seriousDFW

Some good advice here.

Strange how CC companies treat the way CCs are used by customers. I'd have thought you paying the minimum payment each month was ideal for them - they make the most money out of you yet you're still making the required payments.

Catch22_2

I know but I guess they also want their money back at some point and I've been making the minimum payment only over the past 18 months or so. I'm going to prioritize it anyway over the next couple of months and that will feel nice, to then have no credit card debt at all :-)