Sainsbury's gives and then it takes away

Sainsbury's Bank was eager to shout about the cuts to its personal loan rates last week, but rather less vocal on the hike in annual percentage rates (APRs) on its credit cards.

In a summer promotional push, the supermarket bank announced it was chipping 0.4 points off the APR for online loan applications of £5,000 or more. That made the rate 6.5 - an improvement, but still some way off the most competitive deals, such as 5.7 per cent at Northern Rock.

But while wooing new customers, it slapped on higher APR charges for nearly a quarter of its existing credit card customers, blaming higher "administrative costs".

It says that the rises, taking effect from next month's statement - in many instances by 3 points to an APR of 18.95 on new purchases - will mainly affect customers with cards taken out more than five years ago.

But many who signed up between 2000 and 2003 will also be affected, a spokesman admits.

One customer contacting The Independent on Sunday said his card, barely one year old, had also been targeted.

All Sainsbury's customers affected by the changes will have been contacted by post.

Andrew Hagger from financial analyst Moneyfacts says an increase of this magnitude will be "hard for many cardholders to swallow", especially as the Bank of England base rate has stayed at 4.75 per cent since August 2004.

Similar criticism was levelled at Sainsbury's Bank in February when it slashed rates on savings accounts by up to 0.75 per cent - with no base rate move as justification.

"In the past few weeks, some of the major players in the personal finance market have voiced their concerns about increased levels of bad debt," says Mr Hagger.

"If lenders increase rates in this manner, it is certainly not going to help matters."

In its defence, a Sainsbury's Bank spokesman said unhappy customers were welcome to switch to its current standard or platinum cards offering 0 per cent interest on purchases for 12 months - subject to the usual credit references.

Alternatively, both the Halifax and Intelligent Finance have cards offering a 0 per cent deal for nine months - before switching to a rate of 12.9 per cent.

For a one-rate, low-interest card, Capital One's No Hassle offers 6.9 per cent.