Nationwide increasing credit card interest rate by 50%

david72

Ouch, I have just received a letter from Nationwide saying that they are increasing my credit card interest rate by a whopping 50%. I have a members-only card that I have had for a good number of years, and until now it was charging a fair and not unreasonable interest rate of 9.9%, which was perfectly reasonable for the occasional borrowing over a couple of months or for much larger purchases over a longer period. The interest rate is being increased to 14.9%, which is a really hefty and shocking increase.

I suppose the only small comfort I can take is that this increase, very disappointing as it is, will take it to the same range that many credit cards from non-mutuals were charging when I last looked a few years ago; but, having a quick look around now, it seems that many of them have since snuck up their rates to over 20%! (But even that jump is "only" a ~25% increase in absolute terms, making Nationwide's larger increase quite disgraceful, and not at all what you would expect from a mutual.)

And it looks like Nationwide's currently available credit card charges an extortionate 24.9%, and that is the member-only rate! (When I took out my card, there was also a slightly higher rate card for non-members. That really is exploitative. I guess this seems to be another way that "membership doesn't have as many privileges" any more. (I suppose the cackling crow rebranding has to be paid for somehow…)

eskbanker

There are various recent threads detailing how multiple providers have increased card interest rates by five percentage points, so it's not out of step with the market, but obviously if you choose to express it as a percentage increase from a low rate then it'll seem more excessive.

Hoenir

What's been the increase in the BOE's base rate ?  

eskbanker

Hoenir said:

What's been the increase in the BOE's base rate ?  

https://www.statista.com/statistics/1419158/united-kingdom-uk-credit-card-interest-rates/ illustrates historical lack of direct correlation....

Hoenir

eskbanker said:

Hoenir said:

What's been the increase in the BOE's base rate ?  

https://www.statista.com/statistics/1419158/united-kingdom-uk-credit-card-interest-rates/ illustrates historical lack of direct correlation....

At the current time I'd suggest that there's a clear correlation. As to why the cost of money is increasing across all forms of lending.  Remember in 2020 base rate hit 0.1% and is now 5.25%.  Depositors have a choice as where to place their savings. 

eskbanker

Hoenir said:

eskbanker said:

Hoenir said:

What's been the increase in the BOE's base rate ?  

https://www.statista.com/statistics/1419158/united-kingdom-uk-credit-card-interest-rates/ illustrates historical lack of direct correlation....

At the current time I'd suggest that there's a clear correlation. As to why the cost of money is increasing across all forms of lending.  Remember in 2020 base rate hit 0.1% and is now 5.25%.  Depositors have a choice as where to place their savings. 

It's still unclear exactly what your point is, but in terms of current correlation, the base rate has been unchanged for nearly seven months now, albeit after a lengthy run of consecutive increases.

MorningcoffeeIV

david72 said:

.
 That really is exploitative. 

I don't think 'exploitative' means what you think it means... 

david72

eskbanker said:

There are various recent threads detailing how multiple providers have increased card interest rates by five percentage points, so it's not out of step with the market, but obviously if you choose to express it as a percentage increase from a low rate then it'll seem more excessive.

Ah, I hadn't realised that other credit card lenders had also been hoicking up their rates considerably very recently.

The percentage-points increase therefore may indeed be similar, but I think I'm not being unreasonable in expressing some shock at the actual magnitude of the increase in comparison. You would (perhaps naively) expect banks to vary their rates by a similar order of magnitude, assuming that their reasons for doing so are fairly similar.

You noted in another reply that the BoE rate and credit card rates don't necessarily correlate directly, which I would agree with, but it nevertheless is rather annoying as they were clearly happy to charge the current rate for many many years: I can't remember how long I have had this card for, but definitely from before the late 00s recession, with the rate having been set at a time when the BoE rate was fairly similar to now (certainly not in the sub-1% era), so this sudden increase does seem rather disproportionate.

But sadly it looks like it will probably be hard to find a better rate elsewhere, so I'll probably just have to grin and bear it.

david72

MorningcoffeeIV said:

I don't think 'exploitative' means what you think it means... 

I think it's pretty fair to say that credit card rates over 20%, and overdraft rates of 40% are pretty exploitative. These are almost banana-republic rates, and the UK hasn't quite reached that stage…

These rates are now completely out of kilter with what it costs lenders to lend money, and, if anything, are just making things even harder for people who might need to spread costs for a few months. It's just greedy profiteering.

BoGoF

david72 said:

MorningcoffeeIV said:

I don't think 'exploitative' means what you think it means... 

I think it's pretty fair to say that credit card rates over 20%, and overdraft rates of 40% are pretty exploitative. These are almost banana-republic rates, and the UK hasn't quite reached that stage…

These rates are now completely out of kilter with what it costs lenders to lend money, and, if anything, are just making things even harder for people who might need to spread costs for a few months. It's just greedy profiteering.

Is it fair to say? A quick google tells you that average credit card interest rates in the USA is over 27%.

Many factors at play, including possible increased default rates meaning money has to be recouped somewhere.

If you don't want to accept the increased rate than you can reject with no further card usage. For those paying interest on a credit card balance I would suggest that is the way to go as it has always been the most expensive way to borrow money.

enthusiasticsaver

It isn’t out of step with other credit card providers. Can you not get a 0% BT card? Or don’t use credit cards would be the answer. If you only use them occasionally rather than holding large balances on them I suggest building up a savings pot as it is always cheapest to borrow from yourself.