Sudden card rate rise? Don't just shrug, take action

Customers have options, reports Julian Knight

Picture the scene: you open up what you think is a routine letter from your credit card provider and find that the nice, low rate you have been paying is no more.

Suddenly it's going up by several percentage points – but this is not happening to everyone, just to those who the provider thinks are now a higher than normal risk.

It is a slap in the face which is exactly what is happening now to thousands of customers of Virgin Money.

"Those who signed up to a competitive credit card rate in a bid to sort their finances may now be stuck on a high interest card which could make their payments unaffordable once again.

"The message from Virgin seems to be if you can't put up, you have to pay up," says Michael Ossei. a personal finance expert at uSwitch.

Virgin claims that only a small fraction of its customers are being hit by the rate hike, but with other providers waiting in the wings to repeat this unwelcome move, what options do you have should you find yourself targeted in this way?

"I think the practice of reassessing and bumping up borrowers' rates is fairly widespread throughout the industry, but nobody is aware apart from the individual cardholder concerned, unless someone reports it to the media," says David Black, a banking analyst at financial information service Defaqto.

Sometimes, though, the rate increases can be substantial and thousands of card holders are targeted.

"Two high-profile examples were Egg in 2009 which increased interest rates on half a million credit card accounts by up to 7 per cent – blaming rising internal costs and funding costs – then, a year later, Capital One raised some rates more than 7 per cent – blaming the increased risk of lending in an economic downturn," Mr Black said.

"It can seem very unfair that you have seemingly done nothing wrong and your agreed rate is going up. This can be due to the provider suddenly moving the goalposts and reassessing the credit worthiness of customers. When this is done some customers naturally migrate to a higher rate," Mr Black added.

So what should you do if you're unlucky enough to get a letter telling you your rates are going up?

"Well, first things first, it's important to realise that you have the right to reject the increase provided that you do not make any further transactions with the card. If you keep to the terms and conditions – make monthly repayments on time, for example – you continue to make repayments of the outstanding balance on the card at the existing rate of interest for a reasonable period," says Andrew Hagger from financial advice site Moneynet.

If banks want to raise the interest rates, cardholders must be given 60 days to accept or reject the change.

If a customer does not accept the increase, they can choose to close the account and pay off what is left in instalments as long as it is at least the minimum monthly payment, rather than a single lump sum, and at the current rate of interest.

If you can't simply stop using your card then the options are to either accept the new rate or move your balance to a cheaper credit card.

However, it can be hard to find a more competitive deal.

"It is becoming much more difficult to get a new credit card as lenders have really tightened up their underwriting and acceptance criteria over the course of the past few years," said Mr Hagger.

"Increasing numbers of consumers are unable to get a credit card and have effectively become excluded from mainstream credit."

Suggested Topics
Sport
Luis Suarez and Lionel Messi during Barcelona training in August
footballPete Jenson co-ghost wrote Suarez’s autobiography and reveals how desperate he's been to return
News
newsMcKamey Manor says 'there is no escape until the tour is completed'
Voices
Hunted: A stag lies dead on Jura, where David Cameron holidays and has himself stalked deer
voicesThe Scotland I know is becoming a playground for the rich
News
people
PROMOTED VIDEO
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
newsSam Smith’s Mobo triumph is just the latest example of a trend
News
Laurence Easeman and Russell Brand
people
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
News
Shami Chakrabarti
people
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites Star Wars 7 rumours
Sport
football
News
news
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker