Credit Card interest Rates

jonnyround

Why has Virgin which is run by MBNA just increased my interest rate by over 50% from 16.9% to 26.9%. when I ring them they tell me that there is no particular reason but it is in their terms and conditions that they can increase them when they choose. Extremely bizarre in this day and age of low interest rates. Has anybody else had the same problem.

Fruit_and_Nut_Case

jonnyround wrote: »

Why has Virgin which is run by MBNA just increased my interest rate by over 50% from 16.9% to 26.9%. when I ring them they tell me that there is no particular reason but it is in their terms and conditions that they can increase them when they choose. Extremely bizarre in this day and age of low interest rates. Has anybody else had the same problem.

Many people have encountered this. You have the right to refuse the increase, at which point you would no longer be able to use the card for purchases. You would be able to continue paying any existing balance at 16.9%

Your choice.

jonnyround

I have done that but why are they doing it for no apparent reason

[Deleted User]

jonnyround wrote: »

I have done that but why are they doing it for no apparent reason

Err, they're a business.

To make money?

exel1966

jonnyround wrote: »

I have done that but why are they doing it for no apparent reason

They will probably have a very good reason. Credit card APR's are not generally linked to the BOE base rate, therefore it doesn't matter how low that rate is. Your rate will almost certainly be linked to your potential risk and current credit worthiness which will regularly change.
They can of course increase it because they can !

Rafter

Credit card companies, particularly ones with American management use something called 'customer value management' to maximise their income and profit.

They probably see that you don't repay your balance in full and probably can't afford to based on your income and other credit.

They then work out that if they put your rate up they will make more profit even if a few customers, like you do a balance transfer or ask to have their rate frozen.

Personally I think it is short sighted and immoral! Unless their cost of funding or your risk has gone up (because you have taken out more lending elsewhere) I believe they shouldn't be able to increase your rate - certainly by 50% - and certainly when 16.9% was what was advertised when you took out the product.

A mortgage company has to give justifiable reasons why it has increased its SVR and demonstrate it has treated customers fairly. Don't see why credit card companies shouldn't be forced to do the same.

R

YorkshireBoy

Something's spooked them.

It may be a change in/review of policy within MBNA (How have you managed your account?...revolving balance, making no headway, etc?).

Then again, because they take a monthly feed from the CRAs maybe the management of your accounts held elsewhere has given them cause for concern?

It's possible they simply perceive a 'risk' in continuing to lend to you, rather than simply wishing to make more profit out of you.

antrobus

Rafter wrote: »

....A mortgage company has to give justifiable reasons why it has increased its SVR and demonstrate it has treated customers fairly. Don't see why credit card companies shouldn't be forced to do the same....

I think you'll find that a number of mortgage companies have increased their SVRs recently. I'm not sure any of them were subject to any particular requirements to justify the change or demonstrate anything at all.

guesswho2000

exel1966 wrote: »

They will probably have a very good reason....They can of course increase it because they can !

The latter in the above quote is the status quo with MBNA. There's countless threads on the topic. I closed my Virgin card in 2009 because they kept increasing it for no apparent reason.

I assume you're carrying a balance? When you do this, and make the payments on time, they regularly chance their arm by increasing in the hope you'll just accept the increase, therefore earning them more money for providing no extra service.

If you call them and moan, they might not reduce it, or reduce it by a lesser amount - this is what they kept doing to me until I closed it (got bored with calling them twice a year to fight for the APR!)

opinions4u

Reject the rise and stop using it.

Take your business elsewhere.

Accept the rise and get on with it.

Life is full of choices.

Extremely bizarre in this day and age of low interest rates

with more people not paying back at all it makes complete sense.