Tesco credit card - interest rate hike for minimum payments

Emsie1979

I have a query about Tesco credit cards and wondered if anyone else had the same happen to them.

We have the ordinary Tesco credit card (not the new Foundation card to help those with low credit scores), and we were paying off the minimum monthly over a period of time. We hadn't maxed it out or gone over the limit, we weren't using it for new purchases nor had we missed any payments, so although the balance was high is was decreasing, not increasing. We then received a letter from Tesco, quite out of the blue, saying because we were only making minimum payments they were going to hike up our interest rate indefinitely, and the only way to reduce it would be to cancel the card! Not even paying it off would make a difference! it was a letter written in a very accusing way, not at all helpful.

I was utterly furious, so I transferred the balance to another card and I haven't touched my Tesco card since. I have never heard of this, nor has this ever happened with any other card before. Since paying off the balance, I've received letters from Tesco offering us the usual 0% deals, but no offer of reducing our interest rate to the pre-hike level.

Has anyone else encountered this with a card before? Perhaps it's a new thing, or it was in the small-print, but my husband and I had never heard of a hike because of minimum payments, particularly not with a reputable company such as Tesco. Even if they had warned us it would happen if we didn't increase the payments, we could have tried to do something about it before they did it. I just think it smacks of targeting those with less ability to pay, and this in particular I think is shameful by Tesco.

Many thanks!

Faith177

They did the exact same thing to me I've been paying a couple of quid over the minimum payment for a while now due to one thing and another my hike will kick in next month I believe.

I haven't closed the card as we will have money coming from my OH's PI claim hopefully soon so we'll just use that to pay them off in full then they can go whistle

GingerBob_3

Emsie1979 wrote: »

I have a query about Tesco credit cards and wondered if anyone else had the same happen to them.

We have the ordinary Tesco credit card (not the new Foundation card to help those with low credit scores), and we were paying off the minimum monthly over a period of time. We hadn't maxed it out or gone over the limit, we weren't using it for new purchases nor had we missed any payments, so although the balance was high is was decreasing, not increasing. We then received a letter from Tesco, quite out of the blue, saying because we were only making minimum payments they were going to hike up our interest rate indefinitely, and the only way to reduce it would be to cancel the card! Not even paying it off would make a difference! it was a letter written in a very accusing way, not at all helpful.

I was utterly furious, so I transferred the balance to another card and I haven't touched my Tesco card since. I have never heard of this, nor has this ever happened with any other card before. Since paying off the balance, I've received letters from Tesco offering us the usual 0% deals, but no offer of reducing our interest rate to the pre-hike level.

Has anyone else encountered this with a card before? Perhaps it's a new thing, or it was in the small-print, but my husband and I had never heard of a hike because of minimum payments, particularly not with a reputable company such as Tesco. Even if they had warned us it would happen if we didn't increase the payments, we could have tried to do something about it before they did it. I just think it smacks of targeting those with less ability to pay, and this in particular I think is shameful by Tesco.

Many thanks!

I had a similar experience with Amex a few years ago. Out of the blue they stopped cash withdrawals, upped the interest rate (I think) and lowered my credit limit. They didn't explain why, but I think it was because I was in the habit of getting cash withdrawals at the airport, due to the card being used for business travelling.


I immediately stopped using it. Twelve months later I rang them to close the card and told them never, ever, to contact me again - and they haven't. They lost a good customer; idiots!


So for the Tesco card - from now on use it once a year for a trivial amount. Don't close it. Just let them lose money on your account by having to send out statements to you and process negligible amounts. Don't ever speak to them again and brief against them at every opportunity.

premierfella

As ever with financial products, I believe they explicitly say in the small print that they can change the interest rate if the behaviour on the account makes them think the customer risk profile has changed.

Credit card companies make a nice profit on customers just making minimum payments every month and getting charged the standard rate, but it seems unusually that Tesco must have unusual internal guidelines that mean they are happy to lose such customers. A bit odd though, as I imagine if it is standard policy to hike the rate for all customers making only minimum payments for a given period of time, that must mean they lose the "good" profitable customers (who jump ship instead of accepting the higher rate) and are only then stuck with the "bad" profitable customers (who are making minimum payments because that is all they can afford).

Lose the profitable customers whilst nudging the borderline defaulters into actual default - the policy would only make sense if a lot of "good" customers stayed with them regardless (which seems unlikely?)

Dobbibill

It's a risk based assessment.

Some CC providers allow you to decline the rate increase and pay off at the current APR. (although that does mean you are effectively closing the account and are unable to use it further, you are only able to pay off the balance, albeit bit at a time)

Worth checking if that's the case with Tesco.

As said by premierfella, it will be in the T&Cs somewhere. It's not uncommon.

A4445

Credit Card companies normally increase interest if you have become more risky. It maybe they looked at your account and felt there was the case. It's not nice but happens. Usually you can stop the rate increase but you can't make any further purchases on the card. This happened to me several years ago with an Egg card.

Ben8282

If you were able to transfer the balance, then why were you paying interest on your Tesco card balance in the first place? You have nothing to be angry about; Tesco have done you a favour. Think of all the interest you are now saving.

molerat

If you were not able to BT or pay it off you could have refused the rate hike, as the detail of letter would have informed you, and carried on paying it off as you were.

chattychappy

When you chose to borrow from Tesco, you agreed that they could vary the interest rate. This is what they have done - probably because of risk assessment. Or even because they think it's a chance to make more money out of you. You have the right to reject the interest rate rise on the basis you stop using the card. Not necessary since you transferred the balance.

You have nothing to be "utterly furious" about. There is nothing "shameful" about Tesco's conduct and I suspect the letter they sent you wasn't "accusing". I've had interest hikes too. It's business.

Suggest you don't take out these products if you can get so upset.

System

The risk factor (for all issuers) is that people just making the monthly payment, for an extended period of time, have run up debts they can't repay. These are the accounts most likely to go delinquent, part of a Trust deed / IVA or bankruptcy.

They were offering you the current rate if you closed the card to new transactions - a good option for all parties IMO

takman

Making just the minimum payment each month on a card that is charging interest is something that only someone who is struggling alot with money would do, so that makes you a higher risk so it's only fair you pay a higher interest rate because your statistically more likely to default on your payments.

Unless your have a 0% offer then always pay as much as you can afford to clear the balance, even if it's just £1 more than the minimum, "every little helps" as they say .

Also considering that the higher interest rate was effectively only for any extra spending you did on the card, then if you don't use the card like you said, it didn't effect you anyway!.