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Sancho Panza

Barclaycard Paves The Way For Rate Rises

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http://www.telegraph.co.uk/finance/personalfinance/borrowing/creditcards/10168378/Barclaycard-paves-the-way-for-rate-rises.html

'Cardholders with rates that "track" the Bank Rate have been told that from September 1 they will instead be "put on variable interest rates".

In other words Barclaycard's link with the key rate - which has fallen by more than five percentage points since the onset of the banking crisis - has been broken, giving the card issuer freedom to increase its rates at will.

It is not clear how many of Barclaycard's total 10m customers are affected, but those whose contracts include the tracker term are expected to be longstanding customers who have held cards for five years or more.

The lender says those affected are a "minority". Barclaycard will not disclose the rates these borrowers pay, though it is expected they are lower than the rates charged to other cardholders, and The Telegraph is aware that in some cases the tracker rates are as low as 10.5pc. This is unusually low for a credit card rate. The majority of Barclaycard accounts available to new applicants today come with an interest rate almost twice as high, typically 19pc.

There is no explanation of why the change is being made, although the letters do point out the alteration comes "at a time when the Bank of England's Base Rate is at an all-time low." The Bank Rate plunged from 5.75pc in mid-2007 to 0.5pc in March 2009 where it has since remained.

Barclaycard declined to say how many customers were implicated but told The Telegraph:

Tracker rates on both credit cards and mortgages, agreed before the precipitous plunge in the Bank Rate, have become a nightmare for lenders who have sought to wriggle out of their "tracking" obligations wherever contracts permit.

Bank of Ireland UK is the latest lender to become embroiled in this controversy: earlier this year it increased the "differential" by which the mortgages of almost 13,000 borrowers tracked the Base Rate.

The Financial Ombudsman Service is currently considering whether this was fair.

Barclaycard's move comes as rates on plastic are drifting up more widely. Moneyfacts, the data compiler, says average long-term card rates - aimed at mainstream borrowers - reached an all-time high in April this year, at 19.1pc. They have since dropped back fractionally to an average 18.9pc, Moneyfacts's Rachel Springall said, though the trend is "in the upward direction."

The latest annual statistics from the UK Cards Association, the sector's trade body, published last month, said outstanding borrowing on credit cards "has fallen from a peak of £67.4bn in 2005 to £55.1bn at the end of 2012." This represents about 4pc of the country's total personal borrowing of £1.4trillion, it said.

It added that 81pc of all credit and charge card spending in 2012 was made by cardholders who repaid the balance in full. '

One does wonder at how credit card lending was ever linked to the base rate.

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http://www.telegraph.co.uk/finance/personalfinance/borrowing/creditcards/10168378/Barclaycard-paves-the-way-for-rate-rises.html

'Cardholders with rates that "track" the Bank Rate have been told that from September 1 they will instead be "put on variable interest rates".

In other words Barclaycard's link with the key rate - which has fallen by more than five percentage points since the onset of the banking crisis - has been broken, giving the card issuer freedom to increase its rates at will.

It is not clear how many of Barclaycard's total 10m customers are affected, but those whose contracts include the tracker term are expected to be longstanding customers who have held cards for five years or more.

The lender says those affected are a "minority". Barclaycard will not disclose the rates these borrowers pay, though it is expected they are lower than the rates charged to other cardholders, and The Telegraph is aware that in some cases the tracker rates are as low as 10.5pc. This is unusually low for a credit card rate. The majority of Barclaycard accounts available to new applicants today come with an interest rate almost twice as high, typically 19pc.

There is no explanation of why the change is being made, although the letters do point out the alteration comes "at a time when the Bank of England's Base Rate is at an all-time low." The Bank Rate plunged from 5.75pc in mid-2007 to 0.5pc in March 2009 where it has since remained.

Barclaycard declined to say how many customers were implicated but told The Telegraph:

Tracker rates on both credit cards and mortgages, agreed before the precipitous plunge in the Bank Rate, have become a nightmare for lenders who have sought to wriggle out of their "tracking" obligations wherever contracts permit.

Bank of Ireland UK is the latest lender to become embroiled in this controversy: earlier this year it increased the "differential" by which the mortgages of almost 13,000 borrowers tracked the Base Rate.

The Financial Ombudsman Service is currently considering whether this was fair.

Barclaycard's move comes as rates on plastic are drifting up more widely. Moneyfacts, the data compiler, says average long-term card rates - aimed at mainstream borrowers - reached an all-time high in April this year, at 19.1pc. They have since dropped back fractionally to an average 18.9pc, Moneyfacts's Rachel Springall said, though the trend is "in the upward direction."

The latest annual statistics from the UK Cards Association, the sector's trade body, published last month, said outstanding borrowing on credit cards "has fallen from a peak of £67.4bn in 2005 to £55.1bn at the end of 2012." This represents about 4pc of the country's total personal borrowing of £1.4trillion, it said.

It added that 81pc of all credit and charge card spending in 2012 was made by cardholders who repaid the balance in full. '

One does wonder at how credit card lending was ever linked to the base rate.

Credit card balances are at an (approximate) all time high, as they have been for a while. I think we are more or less at the maximum that can be borne.

Banks have overseen a precipitous decline in personal loan balances over the past few years. I guess these tick all the wrong boxes for a bank in Sh*t St.- relatively low rates must be offered to get a sale, and that sale now offers limited scope for selling profitable adds on in the wake of PPI. I don't think it would be too cynical to suggest that some would conclude that the only way to simulataneously wring more money from the consumer credit book whilst deleveraging is to jack up CC spreads and hope more tip over into a cycle of carrying a balance each month.

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http://www.bba.org.uk/statistics/article/may-2013-figures-for-the-high-street-banks/high-street-banking/

Edited by cheeznbreed

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They're probably referring to people like me. My Barclaycard rate is 9.9% (not a typo).

It matters not tbh as when I use it I always clear the balance in full before any interest kicks in.

Very gratifying to receive my annual statement for the past few years and the breakdown of interest, charges etc are just a sea of zeros :lol:

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They're probably referring to people like me. My Barclaycard rate is 9.9% (not a typo).

It matters not tbh as when I use it I always clear the balance in full before any interest kicks in.

Very gratifying to receive my annual statement for the past few years and the breakdown of interest, charges etc are just a sea of zeros :lol:

Isn't it just :D.

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I only got a credit card to help my credit rating. Never remember to use the thing. Needing credit is good apparently.

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  • 243 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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