Northern Rock/Co-Operative CC

lyn77

Excuse my ignorance but I'm hoping someone can help me? We have a Co-Op CC which was originally a NR credit card (back when we purchased our first house we had the 125% mortgage with a CC which also tracks the Bank's base rate).

Our Monthly Interest rate on the card is 0.649%, AER is 8.1%.

We've just had a letter from Co-Op advising of a "slight adjustment" to the interest rate we currently pay.

It states "before change" interst rate for purchases, cash withdrawals and balance transfers 7.788% which I think works out as the monthly rate of 0.649%, APR 20.1%

"after change" interest rates for purchases, cash withdrawals and balance transfers 7.788%, but APR of 24.3%.

Our current balance (which we're trying to reduce) is 8,786 and the minimum payment is £173. Can anyone try and work out for me when they change the rate, will our payments increase and if so by how much?

The monthly interest "before" and "after" seems to be the same so I'm unsure how I work it out based on the APR?

Thanks guys!
L:T

sfax

If your monthly interest rate goes up from 0.649% to 0.7788% (I assume you mean 0.7788% not 7.788% which would be insane) you'll pay an extra £11.40/month on a balance of £8786. 0.7788% monthly is 9.8% APR. Not sure where you (or they?) get the 20-24% APR from unless you're paying some serious fees and charges on top of the interest or unless you're quoting two different rates

thenudeone

The Annual rate is more than 12 x the monthly rate because interest is added every month, then starts to be charged interest as well as the original spend.

To convert from a monthly rate of 0.649%, use the formula 1.00649^12-1 (just type it into google!) which gives the result 0.0807 (or 8.1% APR when rounded)
I don't know where 20.1% APR comes from - unless the above rate is a special offer rather than the normal rate.

So a monthly rate of 0.7788% (assuming a typo) is only 9.8% APR, not 24.3%.

The minimum payment could be made up of made up of some or all of the interest interest plus some capital repayment, so it's not possible to calculate the interest rate from the payment alone, you'd need the interest charge itself for that (which should be shown separately)

scott_lithgows

If you reject the new rate,your payments wont increase at all.

lyn77

OK. The back of our statement has

Monthly Rate - 0.649%
Annual Rate (AER) - 8.1%
Expiry Date - N/a


The letter that has come out has

Before change:

Interest rates for purchases etc. - 7.788%
APR - 20.1%

After change:

Interests rates for purchases etc. - 7.788%
APR - 24.3%

I'm just trying to gauge whether to reject it if its going to drastically increase our payments or keep it, bearing in mind compared to other higher rate interest, interest of just under £60 a month isn't bad!

Sorry, I'm normally good with money but I'm a dunce when it comes to APR, AER and the like!

mikeymikemcmike

scott_lithgows wrote: »

If you reject the new rate,your payments wont increase at all.

How would I go about rejecting the new rate?

premierfella

I would be going back to Co-op and asking them about the rate quoted, as the interest rates being quoted clearly don't tally and you definitely need to know the rate their proposing to put you onto if you think your existing APR is 8.1% and the letter makes ANY sort of reference to 24.3% APR (unless the 24.3% only applies to cash advances and/or balance transfers and not to purchases).

Rejecting the new rate is straightforward (phone call and letter with proof of posting just to make sure they don't later claim that you never called them!), but has implications. The card account would be frozen (no new spending - I mention this because you say that you are trying to reduce the balance which implies that you might still be actively using the card).

Also (others will know doubt confirm or refute) I think that some card companies will have a set period of time after the account is frozen by which they expect it to be paid off - clearly you are currently looking at years rather than months to pay off, so if Co-op do have a time limit that could be an issue for you unless you are able to transfer the debt elsewhere (as after the set period expires they will probably start registering the account with the agencies as "arrangement to pay" which will affect your credit rating).

mikeymikemcmike

premierfella wrote: »

I would be going back to Co-op and asking them about the rate quoted, as the interest rates being quoted clearly don't tally and you definitely need to know the rate their proposing to put you onto if you think your existing APR is 8.1% and the letter makes ANY sort of reference to 24.3% APR (unless the 24.3% only applies to cash advances and/or balance transfers and not to purchases).

Rejecting the new rate is straightforward (phone call and letter with proof of posting just to make sure they don't later claim that you never called them!), but has implications. The card account would be frozen (no new spending - I mention this because you say that you are trying to reduce the balance which implies that you might still be actively using the card).

Also (others will know doubt confirm or refute) I think that some card companies will have a set period of time after the account is frozen by which they expect it to be paid off - clearly you are currently looking at years rather than months to pay off, so if Co-op do have a time limit that could be an issue for you unless you are able to transfer the debt elsewhere (as after the set period expires they will probably start registering the account with the agencies as "arrangement to pay" which will affect your credit rating).

Thank you for the reply. The letter does not mention any fixed or maximum time limit. It just says "within a reasonable period".

premierfella

I seem to have a recollection of Co-op in the past trying to define "a reasonable period" as 6 months. I'm just suggesting that, if you decide to reject the rate, you make sure that you get some idea from them what they think a "reasonable period" is, as its clearly important in your case with that size of balance and paying off at somewhere in the region of the minimum payment.