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.

That dreadful Vorderman woman should be ashamed, lending her reputation to the loan-sharing business.

loan-sharking, I mean

yes we have raised a generation of idiots who over-stretched to pay over the odds for homes which helped house-prices spiral - accepting "bankers" and "financial advisors" advice without understanding they were salespeople - ignoring the 3 x multiple that previous mortgage takers took

a generation of idiots who see credit as their money and not a costly way to fund a lifestyle they can't afford

and now we should feel pity because rates of interest on credit cards once again spiral to in-store credit card rates?

we have a horrific proportion of our population who are truly poverty-stricken who do have to borrow to eat - who go to loan-sharks - these people aren't credit-card market - they are paying 1000s of % points for short-term loans

"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."

Because there's a massive difference between a loan secured on a home and an unsecured loan. Default on a mortgage and, as a last resort, the bank can foreclose and get some of its money back. Default on a CC secured against nothing at all and the bank has to 'suck it up'.
.

people who take out mortgages believing their low introductory rates are what counts and not working out affordability if rates double or hit the 80s rates of 15 and 16% - again idiotic approach to life

*well well done all of you for having money\a decent credit rating.

it may not affect you but for lots of families working something like a boiler packing up\massive car repair (or anything 'needed unexpectedly') soupled with a bad credit rating leaves no alternative.

as long as you are alright though Jack... what a horrible attitude.*

WTF are you on about TSC? I already stated if we need things we simply have to go without at times, how is that 'having money'??

Cogito - you, I and the banks all know and knew that no way were these houses worth what was being lent against them. But because of the whole scandal of packaging up and selling on debts which led to the whole banking collapse in the first place, this was conveniently ignored.

Is it really more 'responsible' to borrow (or indeed lend) 300K for a tiny overpriced flat than it is to put £20 on the credit card to buy one's family something to eat?

That seems a very odd perspective.

You might argue it made sense for the banks to do both (lend on mortgages and cards) - guaranteed large profits in each case. But I don't see how you can possibly argue that it was less responsible to take out a credit card than buy a property that you couldn't afford and that is probably now in negative equity. The final debt to be paid off with the property is many, many times greater. Yet the system is bending over backwards to bail mortgage borrowers out. While stuffing credit card borrowers completely.

By the way, the MP campaigning for laws re payday loans etc is Stella Creasey - I remember this because her brother is my dh's facebook friend, so I see lots of sweet proud comments about his sis. :)

credit cards are great, but when used as credit not so much.
we have one which we use to book flights or buy expensive (ish) items on the internet for the extra insurance. we pay it off full each month (you can set it up so it does it automatically). the bank probably hate us for that
it might be worth to get the calculator out if overdraft charges are cheaper than credit card costs.

@breadandbutterfly.... There was a brief time when banks were lending 125% mortgages (and people were taking them) because they were gambling that the house would be worth 25% more at some point in the near future. Worst case scenario for the lender was that they would only get back 80% of the loan if they had to foreclose. Ironically, Northern Rock did not have a bad debt problem - their customers were good for the money - they had a cash-flow problem. Secured loans - loans backed up by an asset - are generally considered as low risk and are therefore cheaper.

In the wonderful world of unsecured loans by contrast, if your customer goes bankrupt or enters into an IVA etc the lender risks getting the square root of nothing at all. Bank loans are not so expensive because they are one credit transaction. CCs are expensive because they allow you to make multiple credit transactions at your convenience.

Of course it is shocking, but how else could bankers get those bonuses? Somebody has to pay the money, money doesn't just appear magically and shuffling lots of money around doesn't create money. The best way is through high interest rates on debt, fines and all kinds of charges. That is the UK for you.

What 'all kinds of charges' are these? UK personal current accounts are largely free ... that's not true elsewhere in the world where DDs, writing cheques and cashpoint withdrawals come with costs attached. There are charges for going overdrawn but that's pretty normal everywhere... not something exclusive to the UK

The packaging up of the dodgy loans (ie to sub prime borrowers) happened in the US. How the UK banks got involved was that their investment banking divisions invested in these "assets" as something that would produce a good return. When the US borrowers stopped making their mortgage payments it quickly permeated through the US banking system (where the packaging and investment had been done) into the UK banking system (where investments were made). The cash from the UK banking system (ie the investment banking divisions) effectively propped up the US housing market. The UK banks ended up having to write off these investments as bad investments/assets which is what triggered the 2008 financial crisis. Banks stopped lending money to each other as they didn't know who had these dodgy investments, whether they would also have to write these off as bad investments which would affect their ability to repay other banks.

It has very little to do with UK mortgage companies (retail banks) making loans to people who were stupid enough to take out 125% mortgages. While these are also sub-prime loans, for the large part borrowers haven't defaulted because the Bank of England has kept interest rates low (primarily to encourage banks to lend to each other). So far the UK taxpayer isn't paying for dodgy UK loans but what we have paid for, ultimately, is dodgy US loans.

Cogito makes excellent points about the retail banking system which is in theory free but in reality these days underpinned by sales people flogging financial products as they get commission. Telephone number style banking bonuses aren't earned from flogging these products (inc mortgages) they are earned for structuring investments which (if they go well) make huge profits for the investment division of the banks.

The packaging up of the dodgy loans (ie to sub prime borrowers) happened in the US. How the UK banks got involved was that their investment banking divisions invested in these "assets" as something that would produce a good return. When the US borrowers stopped making their mortgage payments it quickly permeated through the US banking system (where the packaging and investment had been done) into the UK banking system (where investments were made). The cash from the UK banking system (ie the investment banking divisions) effectively propped up the US housing market. The UK banks ended up having to write off these investments as bad investments/assets which is what triggered the 2008 financial crisis. Banks stopped lending money to each other as they didn't know who had these dodgy investments, whether they would also have to write these off as bad investments which would affect their ability to repay other banks.

It has very little to do with UK mortgage companies (retail banks) making loans to people who were stupid enough to take out 125% mortgages. While these are also sub-prime loans, for the large part borrowers haven't defaulted because the Bank of England has kept interest rates low (primarily to encourage banks to lend to each other). So far the UK taxpayer isn't paying for dodgy UK loans but what we have paid for, ultimately, is dodgy US loans.

Cogito makes excellent points about the retail banking system which is in theory free but in reality these days underpinned by sales people flogging financial products as they get commission. Telephone number style banking bonuses aren't earned from flogging these products (inc mortgages) they are earned for structuring investments which (if they go well) make huge profits for the investment division of the banks.

I heard you the first time! [hgrin] [hgrin]

sorry, bloody phone! I post from it while I feed. I always want to apologise then think that will also double post so I will look a bigger prat. right here goes....!

it goes wrong at the point when the credit card is taken out: if you cannot afford what you plan to spent the money on, how are you going to afford to pay the credit card company back?

but if the credit card companies charge such high interest rates, they are not looking for all clients to repay them because they can make a profit by trapping people!

pay day loans the same but worse: i was looking at the wonga website recently. it shows you the cost of borrowing for up to 30 days, but on the basis you are likely to need another loan to repay the first, it is seems deceitful IMO to only show the cost for the first loan. You cannot choose to look at the cost over 2 months.

the govt could easily make companies include simple, consumer friendly realistic cost information but they dont want us to stop spending.

There are reasons for using credit cards even if you don't actually need the credit.

For example I paid for a chest of drawers from Habitat when they went into administration on my credit card even though I had the cash. I then paid it off immediately. I did that because if Habitat failed to deliver I would have the extra guarantee from the credit card company.

The same with the washing machine, I had the cash but wanted to put it on a credit card for the guarantee and then there was a 0% promo rate, so it made sense rather than taking money out of my savings to just pay it off out of my salary before the promo rate ended.