To think credit card interest rates are an absolute scandal.

[trixymalixy]

letter from DH's credit card company today saying the apr on his credit card is increasing from 18.9% to 27.9%!!!!!

How can they justify such a huge increase and charging nearly 30%!!

Thankful we have no balance on it as we used it for the 0% offer to buy a washing machine and have paid it off, but it's just piling on more misery when so many people are struggling financially with so many price rises and redundancies.

I think it's shocking and the government should tackle it.

The credit card would have been cancelled anyway as the 0% rate period has come to an end and there is no balance on it.

Yes i agree its taking the piss

And the letter does state clearly that you can write to say you don't have to agree to the increase, whichnwe would be doing if we weren't closing it.

Yes it is a scandal, yes it is blatent profiteering, yes it is unreasonably high.

But unless someone ties you to a chair and makes you sign the application form against your will, whose damn fault is it?

I agree that no one puts a gun to your head to make you take out these ridiculous loans, however I think its a scandal that people aren't better educated as to the implications. Credit card literature should clearly explain how long it will take you to pay off the maximum limit balance if you only make minimum payments. It would make people think twice.

I agree that no one puts a gun to your head to make you take out these ridiculous loans, however I think its a scandal that people aren't better educated as to the implications. Credit card literature should clearly explain how long it will take you to pay off the maximum limit balance if you only make minimum payments. It would make people think twice.

To leave a balance on a credit card rather than moving it to a lower rate loan, you have to either a)not know better, b)stupid(I.e. Know better but for whatever reason don't move it),c) in financial difficulty and have wrecked your credit rating for whatever reason.

b) I don't give a shit about, a) I feel for and c) depending on the reasons for the credit card debt and the wrecked credit rating if it's through desperation and not living beyond their means I feel for too.

I feel quite sad that so many of you have so little sympathy for others and assume that all credit card debt is through greed.

When I taught we started doing basic financial classes (explaining interest rates, bank accounts etc) which I thought was a great idea. If you come from a family with little or no financial savvy then you believe the glossy ads and won't necessarily understand the small print.

In light if the govt having bailed out banks at all of our expense and the recent quantitative easing etc etc I do think it is taking the piss to hoik up rates to such an excessive degree.

I am a credit card phobe since my student excesses but I can fully understand how people (and generally those in the most precarious of financial positions) can get themselves in over their heads. I have a friend who has to live a fair distance from work on order to be able to afford rent, public transport round her is dire and expensive so she has to drive. With fuel and everything else having gone up so much she now cannot afford to get to work...does she quit or bung the excess on the cc in the hope of riding out the storm and hanging on to her job? She earns well, lives frugally etc but the cost of living increases are hitting her and others hard.

I agree about switching to take advantage of deals though, but sometimes not that easy for people.

"But its still shocking that a bank can justify increasing its rates by 50% to nearly 30% when the base rate is so low"

Credit card interest has nothing to do with base rates. It's a financial 'convenience' product sold to make money for the provider. They charge shops for every transaction, they charge customers for holding a credit balance and they charge more for cash withdrawals. They charge what the market will stand. With all the comparison sites around, if you're not happy with a 29% APR you can shop around for a lower rate.

Banks and other financial companies got rightly criticised a few years ago for running their businesses too close to the wire, lending out irresponsibly, and not having enough cash deposits to back up their borrowings. Crystal ball time...... all banks are now having to build up their reserves and we are going to find that the cost of personal banking goes up. Basic account customers at Nat West are already being told to use only Nat West cash machines as a cost saving measure. My prediction is that free current accounts are next in the spotlight. Few other countries have free personal banking and we are probably going to go back to the days when we are charged for transactions.

True Cogito, IF you can shop around.

Banks profits are determined by the difference between the rates they can borrow and lend at so the base rate is relevant.

Credit cards are a convenience product but also increasingly used by people to make ends meet.

Yes, it's a big if. If you have a bad credit rating you don't get the best rates anywhere... that's life. Same as young male drivers pay the most car insurance because they're most likely to crash. Profits are not just an interest rate differential, they also have to cover the cost of administration and - very important - bad debts. With the record number of people going bankrupt and onto debt administration plans, credit card companies have to cover the costs by charging everyone else more. And they may well be used to make ends meet or to cover emergencies just the same as they are used to buy a luxury item... the CC company can't distinguish between essentials and luxuries, it's just money being borrowed.

Ultimately, what we borrow is our call. It may be we're taking a calculated risk, forced by circumstances or being totally irresponsible. If we can assure the lender we can pay it back, they'll give us the credit. If we can't, we don't get the credit and people end up with loan sharks and tally-men. If we mess up... it's our responsibility.

"Credit cards are a convenience product but also increasingly used by people to make ends meet."

But they don't make ends meet. They put you into debt which ends up costing you a lot more.

If I can't afford to pay £100 cash for something, or to save up the £100, how can I afford to pay for it over five years at a cost of £200?

Oh jesus. Let them eat cake.

Yes we all know that piglet, but I think people think they will be able to pay it back the next month.

Yes it's not up to the banks to provide a low cost solution for people to manage their cashflows, but increasing their rate by 50% is a little excessive.

If they think that then they're in the 'calculated risk' bracket. They are no different to someone taking out a whopping great mortgage on a house gambling that they're going to be able to keep up with the payments for the next 25 years. Mortgage rates can go up and down (and I don't see many 0.5% offers, do you?), property values rise and fall and, generally, 'shit happens'. Using the CC to pay for petrol for a few months because you're a bit short is the same kind of calculated risk... and if someone doesn't know that's going to cost them interest, they should find out more.

So why is it OK for credit card customers to be charged rates of 20, 30% +, yet if someone has taken out a stupid 100% (or indeed 125%!) mortgage on an overpriced house they couldn't afford, quite possibly lying blatantly to get the mortgage in the first place, we're all supposed to go Aah, poor dear, can't make them homeless, so we pay their mortgage interest on their chosen dream house for 2 years! whilst they pay not a penny!

I don't see why interest rates are held so low, banks told not to repossess houses, mortgage interest support offered for those who've borrowed hundreds of thousands, yet for those who have borrowed relatively tiny sums on a credit card (and who didn't have the luxury of 'adding it to the mortgage' to pay it off ), usually to pay for essentials they cannot afford otherwise, they are to be regarded as feckless and irresponsible and told to suck it up.

It really pisses me off as a tenant that not only are house prices ludicrous but as well as paying inflated rents I am expected to bail out overstretched mortgage borrowers. When those with (much smaller) credit card debts benefit not at all from the low interest rates, and the banks who we ALSO bailed out continue to bail out enjoy record-breaking profits and bonuses.

To solve the current economic crisis (a) house prices need to be allowed to fall drastically and (b) ordinary people rather than bankers need to be supported. Of course, these are two sides of one coin - if house prices fall, the banks will collapse which is why we are all suffering record inflation as a result of low interest rates, and yet everyone stays shtum on credit card interest rates.

I do think that credit card interest rates used to be far closer to the bank rate though (probably the last time I had a card in the 1980s when the bank rate was around 15%. Or was that mortgages?)

Banks have been ratcheting up interest rates for at least ten years. When Interest rates go up 1%, they raise them 1% or more. When interest rates go down 1%, they lower them 1/2% (if at all).

They are just out to maximise their profits. Let no-one think they are kindly institutions providing a public service.

Credit cards aren't free money

If you can't afford to pay it off each month you should not have one

idiots

No, not idiots. Maybe people who could afford it - just - when interest rates were low. But not when the rates are jacked up by 10 or 15%.

Also is an idiot someone who borrows money to eat, pay rent etc? Or is the idiot the person who lets themselves or their families starve?

See here:

www.guardian.co.uk/money/2011/jan/06/credit-cards-pay-mortgage-rent

Are all these people 'idiots'? Or just desparate? :(

Sorry:

www.guardian.co.uk/money/2011/jan/06/credit-cards-pay-mortgage-rent

The current government has promised to tackle this.

These people are not idiots - but they are vulnerable.

There is a female politician (can't remember her name or party ) who is campaigning very strongly against credit card cos high interest rates and 'money shops'.

BTW I know all this from a Sunday Times magazine article on this very subject a couple of weeks ago

Or both?

The article has, by luck or judgement, only included quotes from sensible-sounding people.

But there isn't any doubt that trying to get round a money problem by going deeper into debt, especially at high interest rates, is a recipe for diasaste

As you can read in the article,

"Campbell Robb, chief executive of Shelter, said: "This research brings into sharp focus how keeping a roof over their head has become a daily struggle for millions across the country. This is a totally unsustainable situation and one which we fear could see thousands more families pushed into the spiral of debt, eviction or repossession and ultimately homelessness.

"Using credit cards to pay the rent or mortgage is simply robbing Peter to pay Paul. With the average credit card interest rate now standing at over 16% it is the worst possible course of action. Already someone faces the nightmare of losing their home every two minutes, and we would urge every single one of these people now relying on credit to keep their home to seek advice urgently."

They do totally mis-sell them though, and push them on people who really shouldn't have credit.

I was shopping with a friend the other day and she went in the bank to get some cash, and they were telling her she was eligible for a credit card and why didn't she apply and she never knew when it could come in handy especially with Christmas coming up... But she is a single parent on benefits FFS, and they must now that because they can see what she gets paid and when