Royal Bank of Scotland has imposed massive hikes in interest rate charges for credit cards used by millions of borrowers, a survey shows today.
RBS, Natwest and Mint cards owned by the RBS Group – which the Government controls – raised their APR from 12.9 per cent to 16.9 per cent in the 12 months to February, a rise of 31 per cent.
The bank increased the rates despite large falls in inflation. In the year to February the Bank of England base rate fell from 5.25 per cent to 1 per cent and now stands at 0.5 per cent. The Retail Price Index fell 0.4 per cent last month, the first time prices have gone into reverse for almost 50 years.
The consumer group Which?, authors of the survey, accused card companies of being "out of touch with reality". It found that 28 providers of widely held credit cards had either increased interest rates or other charges, reduced the number of days to pay or reduced the number of interest-free days over the last year.
On average, credit card rates rose by 0.5 per cent from 16.2 per cent APR to 16.7 per cent APR. However, there many cases where companies with millions of customers had put up rates by far more. The publicly owned Post Office has put its rates up by 3 percentage points to 19.9 per cent – a hike of 18 per cent.
The Master Card APR from Halifax/Bank of Scotland leapt from 9.9 per cent to 15.9 per cent, a rise of 60 per cent, though it is still cheaper than many rivals. Other companies have left their headline APR alone but put rates up for their existing customers. Egg, for instance, recently put its rates up for half a million of its customers by up to 7 percentage points
The moves come despite a credit card summit held by the Government last year at which 13 leading providers – including RBS Group – agreed to be more sensitive to consumers during the credit crunch.
The Prime Minister Gordon Brown called the summit after The Independent disclosed on 11 November that credit card providers had increased rates by 0.4 percentage points to 17.6 per cent despite falls in the Bank of England base rate.
The Liberal Democrat Treasury spokesman Lord Oakeshott said: "The new bosses at RBS are fast learners in the Fred Goodwin school of greed. These taxpayer-owned banks must stop spanking their credit card customers. Paying these extortionate interest rates in the high teens destroys your financial health just like 50 cigarettes a day or 50 drinks a week. People should pay their credit card debts off for good as soon as they can."
Which? advised customers to shop around for good deals, saying that someone borrowing £1,000 over a year could save £70 by taking out a cheaper card.
During its investigation for the May issue of Which? Money, the consumer group found what it described as "a big squeeze" on rates and other conditions.
Both MBNA and Alliance & Leicester have reduced the number of interest-free days and days to pay on cards. Only eight companies still offer cashback cards – less than half of those available two years ago. Some have also cut the amount of cashback available.
Many providers have put up balance transfer fees over the year, Which? complained. Ulster Bank increased its introductory balance transfer rate from 0 per cent to 4.95 per cent and also introduced a transfer fee of 2.9 per cent to its introductory offer on two credit cards.
In a statement RBS said: "Any adjustments we have made to our credit card rates over the last 12 months have simply brought us in line with our competitors. Any customer experiencing difficulty with repayments should look to contact us immediately so we can look to help them with alternative arrangements. We also provide up to 60 days' breathing space for customers struggling to meet their monthly repayments."