Virgin increasing credit card interest rate by over 5%

alfred64

On purchases. From 17.39% to 22.46% Following April's statement.
It will not affect me as I am not and do not intend to carry a balance on my card, but what is this all about and why the big increase? Okay I know they can charge what they like but really is this the way to conduct your business?

wiseonesomeofthetime

Nationwide have just done the same to me, 19.9% to 24.9%, however, because I never carry any balance over, always pay in full, it doesn't bother me tbh.

TadleyBaggie

alfred64 said:

Okay I know they can charge what they like but really is this the way to conduct your business?

They're in the business of maximising profit, so it seems quite a reasonable way to conduct business. There are many other mainstream credit cards with higher interest rates than that.

elasto

I've had a couple of other cards bump their rates like that this last few months. I think it's just a reflection of the credit market tightening.

There's probably been a lot of defaults what with the cost of living crisis: energy and food prices through the roof, mortgage rates rising and so on.

Your rates with Virgin are still lower than mine despite your 5% hike, so count your blessings.

MattMattMattUK

alfred64 said:

On purchases. From 17.39% to 22.46% Following April's statement.

I had this on my Nationwide card the same as WiseOne, 19.9% > 24.9%, I think I had one on my MBNA a few months back as well, something will likely happen to all cards over the next few months. However many cards already have far higher interest rates. 

alfred64 said:

It will not affect me as I am not and do not intend to carry a balance on my card, but what is this all about and why the big increase? 

It is about continuing to make profit because interest rates have risen.

alfred64 said:

Okay I know they can charge what they like but really is this the way to conduct your business?

It seems a perfectly sensible way to conduct business, input costs have risen (borrowing for balances), interest rates have risen across the board, that means that they need to increase their margin they make on their sale (in this case interest on carried balances) to continue to make a profit. Why would you think this is a bad way to conduct a business? 

DullGreyGuy

Its costing them more to get the money to then lend you, given risk margins etc are all done on a percentage basis you then get a compounding impact. They'll also review what their competitors are doing and decide if they want their product to be the cheapest, most expensive, somewhere in the middle etc. 


For those that are carrying balances... from memory you can reject a rate increase which then effectively locks your card so it in essence becomes a high cost loan with tapered repayments.

molerat

TSB have upped my rate from 22.95% to 24.95% so most of them are doing it.

daveyjp

Santander following the flock and also increasing rates.

Hoenir

Interest rates are normalising across the board globally. Depositors want more. Lenders have to charge more.

Regulatory capital requirements for banks are increasing. Holding capital costs money to the lender. 

Customers that default are paid for by those customers that don't. There's no free lunches. 

Defaults are expected to increase in 2024. As higher interest rates ripple through the real economy. Takes around 18 months for a change in BOE base rate to have a noticable impact. Slowly starting to bite now. 

On a far broader macro level Quantative Tightening is draining liquidity from the money markets. Less cash floating around looking for a home. 

CliveOfIndia

M&S just increased the rate on my card as well.  They're owned by HSBC, so I'm guessing HSBC will soon follow suit - if they haven't already.

Must admit I didn't really take any notice of what the rate was as I always pay in full on all my cards so - as the OP noted - it has no effect whatsoever.  I guess it's only a concern if you're carrying a balance.

born_again

CliveOfIndia said:

M&S just increased the rate on my card as well.  They're owned by HSBC, so I'm guessing HSBC will soon follow suit - if they haven't already.

Must admit I didn't really take any notice of what the rate was as I always pay in full on all my cards so - as the OP noted - it has no effect whatsoever.  I guess it's only a concern if you're carrying a balance.

M&S money is a financial entity in it's own right. It has it own banking licence. That is not owned by HSBC.

They simply use HSBC systems & some HSBC staff to do back end operations.