Virgin raises credit card rates

 

Virgin Money has raised interest rates on its credit cards by almost 50% in a further blow to borrowers faced by recent mortgage rate hikes.

Rates on purchases using Virgin credit cards have risen from 16.8% to 24.9% for some customers, while balance transfer rates have increased from 18.9% to 27.9%.

Thousands of selected Virgin Money customers have been earmarked for the increases following a review of the lender's database and they were written to last week and told they can either accept the rises or they will need to pay off their balances.

Sir Richard Branson's Virgin Money, which recently bought Northern Rock, said the rises reflected "responsible" lending and were part of a regular review taking customers' performances and external risks into account.

Virgin Money has around 2.5 million credit card customers and less than 1% of them are understood to be affected, the equivalent of fewer than 25,000 people.

Sir Richard vowed to improve British banking for customers and shake up the industry with "simple, fair and transparent" deals after nationalised Northern Rock was taken over in a £747 million deal.

Customers have been given 30 days notice of the rises and they have 60 days to tell Virgin Money if they do not accept them.

Lenders have been offering some of their cheapest ever deals as the Bank of England maintains the base rate at a 0.5% low, but analysts expect them to tighten up on borrowing this year amid the weak economy and the fallout from the eurozone crisis, meaning more lenders could follow Virgin Money's example.

Despite three years of rock bottom interest rates, Saga found last week that the typical credit card APR has been rising, from 15.73% in 2008 to 17.32%.

Virgin Money's move follows a spate of lenders including Halifax, RBS-NatWest and Clydesdale and Yorkshire Banks announcing mortgage rate rises, affecting more than a million people, blaming the increased cost of funding mortgages.

Kevin Mountford, head of banking at Moneysupermarket.com said: "Rates on credit cards have been rising over time."

He said some lenders have been "repricing" customers in this way for a number of years to help them "balance the books".

Mr Mountford said: "From a customer point of view they are able to reject it. You will no longer be able to use the card but you will be able to pay down the balance using the old rate over time.

"We're in a low base rate environment, banks don't have flexibility on where they can make their money. They are looking at other ways to make up the revenue loss."

A Virgin Money spokeswoman said: "We periodically review credit risk across our portfolio and will change interest rates - up or down - based on those reviews.

"These reviews take into account a customer's performance with us as well as a range of external credit risk factors.

"If we raise a customers' rate based on risk, we are doing so because we feel it is the responsible thing to do."

She said customers were notified in advance and they can reject the new rate and pay off the outstanding balance at the existing rate, in accordance with industry principles.

But one Virgin Money customer told the Daily Telegraph: "Mr Branson has clearly lost his touch with consumers."

PA

Start your day with The Independent, sign up for daily news emails
News
people
News
John Rees-Evans is standing for Ukip in Cardiff South and Penarth
news
Arts and Entertainment
Bianca Miller and Katie Bulmer-Cooke are scrutinised by Lord Sugar's aide Nick Hewer on The Apprentice final
tvBut Bianca Miller has taken on board his comments over pricing
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
PROMOTED VIDEO
News
Elton John and David Furnish exchange marriage vows
peopleSinger posts pictures of nuptials throughout the day
News
in picturesWounded and mangy husky puppy rescued from dump
Sport
David Silva, Andy Carroll, Arsene Wenger and Radamel Falcao
football
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'