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Credit Card Firms Upping Interest Rates - Got A Letter

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Dear Mr loginandtonic

In recent months there has been a steady worsening of the economic environment making it necessary for us to review our customers' accounts...

(from Sept 09) 23.25%p.a. purchases, 26.15p.a. cash advances, 22.79%p.a. balance transfers (all variable of course)

I thought LIBOR was going down?

i thought there was a recovereh?

WHAT'S IN YOUR WALLET? ;)

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Dear Mr loginandtonic

In recent months there has been a steady worsening of the economic environment making it necessary for us to review our customers' accounts...

(from Sept 09) 23.25%p.a. purchases, 26.15p.a. cash advances, 22.79%p.a. balance transfers (all variable of course)

I thought LIBOR was going down?

i thought there was a recovereh?

WHAT'S IN YOUR WALLET? ;)

I got the same letter. I will cancel the card next week once I had a go at them. Strangely only they have a problem borrowing money First direct are offering a 5 year balance transfer @ 5.9%.

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I got the same letter. I will cancel the card next week once I had a go at them. Strangely only they have a problem borrowing money First direct are offering a 5 year balance transfer @ 5.9%.

considering it's one of the nation's most used credit cards, it doesnt come as a good omen for the retail sector

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Dear Mr loginandtonic

In recent months there has been a steady worsening of the economic environment making it necessary for us to review our customers' accounts...

(from Sept 09) 23.25%p.a. purchases, 26.15p.a. cash advances, 22.79%p.a. balance transfers (all variable of course)

I thought LIBOR was going down?

i thought there was a recovereh?

WHAT'S IN YOUR WALLET? ;)

That is a disgrace.

Let me know the number and I will kindly look into it for you.

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Looking at the back you can reject the terms and conditions and continue to repay the card at the old terms you just won't be able to reuse it.

Are Cap1 really just trying to leave the uk market?

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This firm relied almost exclusively on securitisation for funding in the UK. Right now that gives rise to three sources of upward pressure on credit card rates:

1) securitisation transaction documents contain triggers that act to increase the cost of the transaction if yield less expenses less charge-offs (i.e. excess spread) drops too low;

2) FSA rules incentive card companies to increase their rates as delinquencies and charge-offs increase by increasing capital charges to lenders as excess spread falls; and

3) market levels for UK credit card paper remain very high (up to Libor + 500bp in the secondary market for AAA).

Put these together and card lenders are under considerable pressure to re-price, particularly firms like this one with relatively high charge-offs

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Looking at the back you can reject the terms and conditions and continue to repay the card at the old terms you just won't be able to reuse it.

Are Cap1 really just trying to leave the uk market?

Silly old them. They should have asked their debtors for an opinion, but strangely didn't bother. Actually, I'm not interested in your opinion either.

Edited by Laughing Gnome

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Had a similar letter from CapitalOne saying that they were closing my account because I hadn't used it for over a year and because of the worsening economic climate and to reduce exposure to fraud.

Can't say I care and the card was a vile colour anyhow.

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Why have one? i just do not see the point..at least with a debit card you can also do a chargeback..

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Why have one? i just do not see the point..at least with a debit card you can also do a chargeback..

Insurance. If you buy with a credit card and the supplier goes bankrupt the credit card is jointly responsible for the purchase. I used it recently to get them to pay for a repair on a washing machine that originally had an Empire direct 3 year policy.

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yes.but most things are covered by the sales of goods act..fit for purpose part ...i wish more people would use this part of the act more often..

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Guest absolutezero

Could be talking out of my **** but I always got the impression Capital One chased the chav/subprime market.

This isn't based on anything other than their adverts and a general impression.

If I'm right maybe the chavs aren't paying up hence a higher interest rate... :rolleyes:

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yes.but most things are covered by the sales of goods act..fit for purpose part ...i wish more people would use this part of the act more often..

Sales of good Act is not much good if the supplier has gone belly up.

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Insurance. If you buy with a credit card and the supplier goes bankrupt the credit card is jointly responsible for the purchase. I used it recently to get them to pay for a repair on a washing machine that originally had an Empire direct 3 year policy.

Consumer Credit Act, over where it is for a £100+ purchase only afaik

yes.but most things are covered by the sales of goods act..fit for purpose part ...i wish more people would use this part of the act more often..

many retailers laugh if you mention SoGA, they're only interested if they know the CCA comes into play and they can get a chargeback

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Could be talking out of my **** but I always got the impression Capital One chased the chav/subprime market.

This isn't based on anything other than their adverts and a general impression.

If I'm right maybe the chavs aren't paying up hence a higher interest rate... :rolleyes:

Correct. They targetted a barbell portfolio -- sub-prime and super-prime

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I got this letter from cap 1 about 6 months ago.

I took the option to pay it off at the old rate, and I hope everyone else does too. Show them we're sick bailing them out.

Now I don't have a CC at all. I'll stick to Maestro thanks.

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This firm relied almost exclusively on securitisation for funding in the UK. Right now that gives rise to three sources of upward pressure on credit card rates:

1) securitisation transaction documents contain triggers that act to increase the cost of the transaction if yield less expenses less charge-offs (i.e. excess spread) drops too low;

2) FSA rules incentive card companies to increase their rates as delinquencies and charge-offs increase by increasing capital charges to lenders as excess spread falls; and

3) market levels for UK credit card paper remain very high (up to Libor + 500bp in the secondary market for AAA).

Put these together and card lenders are under considerable pressure to re-price, particularly firms like this one with relatively high charge-offs

I'd agree with you and having a major player in the market price in this way means others will feel the door is open for them to re-price now even if they don't need to..... credit card firms always have an eye on the pr effects of their actions and if they feel they can re-price in a month or so and do so with the defence that cap one has been higher for w hile and they are still cheaper than them etc etc then they'll feel thats not a bad place to be.

keep in mind that all those cards funded through the wholesale market will be under similar pressure... greater funding costs, larger bad debt levels, increased new customer sign up costs and decreasing transaction related income (eg interchange fees)... there really is no light there for them... but also bear in mind they can raise charges through the roof should they wish to do so and many customers won't be able to stop them... they may destroy their brands in the Uk but they may equally get out in tact.... during the last recession ,many credir card companies added some quite stiff annual fees to cards just to balance the books.

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Could be talking out of my **** but I always got the impression Capital One chased the chav/subprime market.

This isn't based on anything other than their adverts and a general impression.

If I'm right maybe the chavs aren't paying up hence a higher interest rate... :rolleyes:

When I used to play the 0% game I had a capital one card for awhile, once the balance was paid off I cancelled it.

At one point I had over £30k of instant debt I could spend if I wanted with no possible way of paying it back. They system is crazy. Many will have spent the money...

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When I used to play the 0% game I had a capital one card for awhile, once the balance was paid off I cancelled it.

At one point I had over £30k of instant debt I could spend if I wanted with no possible way of paying it back. They system is crazy. Many will have spent the money...

Whats even crazier is that some plan to use this debt as a route of last resort and other actually class the ability to borrow as an Asset...... credit card companies do have a tradition however of cutting limits during recessions and cutting out cardholders who don't use their cards as it costs them about £5 to run each account each year.

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