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UmBongo
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Given how cheap the money supply is and rock bottom interest rates, why do credit cards put up their interest rates? :/ Do they have their revolving customers by the balls? 1700276941_Inkedcard_LI(2).thumb.jpg.2e73f1a1059d05de092f06b07b6a9260.jpg

Here's a letter I received from Halifax. The interest rate rise won't affect me much as I make an effort to settle balances as soon as I can.

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Rate rise when base rates are largely unchanged from the source, indicates increased risk for the lender. Cash is in short supply, and people are likely to miss payments or even default.

I know around Christmas time, shop lifting increases, shop refund scams increase, and you get the scam phone calls and texts saying that the gubbermint owes you £600 tax refund. I know 4  people including myself have been targeted over the last 2 weeks. 

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I certainly hear less of the six months interest free transfer offers these days so it does look like they have a captive market; I also note that they are choosing to raise the rate on that card to be in line with the other cards they offer rather than reducing the other ones.

I know two people who are a bit stuck in this trap having maxed their cards years ago and now paying a big chunk of their salary in interest.

In pure cash terms the obvious thing to do would be to get a personal loan at a much lower interest rate and pay it off however the situation of being maxed out actually applies a psychological pressure that restricts their spending so in the round they are actually saving money by paying that huge credit card interest bill every month plus the interest gives them an additional pressure to stop spending so that they can reduce that balance and so the interest.

You really wouldn't think that paying 20%+ interest on a credit card balance would actually save you money but there's two cases of which I know where it is doing just that.

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  • 4 weeks later...

Since my last post I have had a communiqué from Virgin Money.

As well as a stocks & shares ISA I also have a boggo savings account with them (for emergencies). The AER on it is going to be cut from a not very generous 1.17% to a pathetic 0.6%. What the bloody hell? :PissedOff:

It's getting harder to save up for shit. 

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longtomsilver

Barclaycard sent a letter this week telling me they've increased my limit by 50% to £4.5k and there's always the 0% 18 month balance transfer available for a small fee ~3%. In time for Christmas, nice 🙄

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3 hours ago, UmBongo said:

Since my last post I have had a communiqué from Virgin Money.

As well as a stocks & shares ISA I also have a boggo savings account with them (for emergencies). The AER on it is going to be cut from a not very generous 1.17% to a pathetic 0.6%. What the bloody hell? :PissedOff:

It's getting harder to save up for shit. 

Cash/mattress. At least they cant steal it (other than by inflation). 

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18 hours ago, longtomsilver said:

Barclaycard sent a letter this week telling me they've increased my limit by 50% to £4.5k and there's always the 0% 18 month balance transfer available for a small fee ~3%. In time for Christmas, nice 🙄

I thought they'd stopped doing that.

My credit card limit went up multiple times unrequested in the 90s, along with everyone else's, but there was a big complaint that it was encouraging people into debt so they were told by the DTI / FSA to stop doing it unless requested.

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51 minutes ago, Frank Hovis said:

I thought they'd stopped doing that.

My credit card limit went up multiple times unrequested in the 90s, along with everyone else's, but there was a big complaint that it was encouraging people into debt so they were told by the DTI / FSA to stop doing it unless requested.

I have lots of credit cards as I'm a 0% borrowing whore. A lot of them have an option now where you can choose if you want any credit limits to be applied automatically or not, fair enough imo.

I have also noticed that the 0% balance transfer deals on MSE are not that great at the moment, only a couple to choose from (no fees) and not for as long as ones that were availabe a while back.

It will be interesting to see how it looks in the new year.

I am also shocked at how high the interest rates are on some of these cards, I'm sure they are as high or higher than cards I had back in the 90's. Some people really are getting screwed on these if paying interest, the question being are the cc companies coining it or do they need it to cover bad debt elsewhere?

My total cc available borrowing is just under 2 x salary. I'm mortgage free so not sure if that is typical or not, but even 1 x salary is a lot of short term expensive debt if you have a mortgage or rent to pay as well. I'll bet there are loads of middle/slightly above average wage earners who are stuck in this trap, the irony being the better wages allow them to get the debt but for some losing their job will mean no other otion than bankruptcy.

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8 minutes ago, null; said:

My total cc available borrowing is just under 2 x salary.

:o

I assume that's over several cards then!

Mine's £7k something and has been for over twenty years since they stopped doing the unrequested increases.  I don't think I've ever had a balance much above a couple of grand when I've just paid for a holiday.

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14 minutes ago, Frank Hovis said:

:o

I assume that's over several cards then!

Mine's £7k something and has been for over twenty years since they stopped doing the unrequested increases.  I don't think I've ever had a balance much above a couple of grand when I've just paid for a holiday.

Yes, I currently have 8 active cards. I don't use all the available credit, normally around 50%. I think of it as long term 0% borrowing and have the means to repay in full if needed. You need to be very organised and disiplined to do this, some of the cards you only need to miss one payment to lose the 0% deal.

Last time I paid cc interest was around 25 years ago and from that I learnt a valuable lesson about being in debt and how hard it can be to get out of it, it took me years to free myself.

It's not as good as it was years ago when you could get a decent savings rate. I used to max out as much as I could on 0% and put the moeny into the best savings account I could find - not worth doing that at todays rates so I invest elsewhere but always ensure I have the liquidity to repay if needed.

Edited by null;
Because I'm anal about spelling and grammer.
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longtomsilver
4 hours ago, Frank Hovis said:

I thought they'd stopped doing that.

My credit card limit went up multiple times unrequested in the 90s, along with everyone else's, but there was a big complaint that it was encouraging people into debt so they were told by the DTI / FSA to stop doing it unless requested.

Sure there's a box to tick to opt out. I'm just curious to see how far they'll go. I have four credit cards with a combined £30k of available credit. Always pay my balance in full. 

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I use mine abroad and to pay up front for e.g. plane tickets, holiday stuff.

I travel a lot and there are no charges on using a CC abroad whereas my debit card has a transaction fee every time. It gets paid off at the end of the month and everyone is happy. Plus it "boosts your credit score", which might be useful if I can ever afford to buy property.

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14 hours ago, Tdog said:

Ive got 3 .. 2 in my name and 1 in the companies. 30k in total.

How many you got up to and whats the total limit .... as ive a cunning plan.

I always leave a little left over so they're making a little bit out of me, so i dont get sacked off by them.

They make money from your transactions by charging c. 3% to the retailer for each transaction; you don't need to worry about their cancelling your card if you don't pay them any interest.

In common with most people I know I've never paid a penny in interest and have had the same card for thirty years.

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  • 9 months later...

On top of the recent news that NS & I slashing their rates, the TSB has just sent me an email warning of a cut in the interest rate of their current accounts. I moved to TSB around 3 years ago because their rates were better than most. 

It is currently a meagre 1.5% on balances up to £1.5k. On 2nd Dec its going down to a big fat zero %. Gee thanks. 9_9

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