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Combating the Credit Card Rate Rises

By: Garry Crystal - Updated: 27 Nov 2012 | comments*Discuss
Credit Card Credit Companies Rate

More than six million UK credit card holders have seen their interest rates suddenly rise. There are ways to combat credit card rate increases, especially for consumers with good credit records.

UK Credit Card Re-Pricing

Millions of UK credit card holders have fallen victim to their credit company’s re-pricing of interest rates, also known as rate-jacking. Although interest rates in the UK are at record low this has not stopped UK credit companies from increasing their credit card interest rates. Some unlucky credit card consumers have actually found their interest rates doubling. Increased credit card rates are happening not only to the high risk customers but also to customers who repay on time.

Justifications for Credit Card Interest Rate Increases

According to the credit companies the interest rate increases are aimed at the high risk customers. High risk customers are people who do not make regular repayments and frequently exceed their credit limits. Unfortunately, a huge number of good credit consumers are also being hit with the increased credit rates. Good credit customers who have been rate-jacked are paying the price and being penalised for customers who cannot manage their debts.

Are the Interest Rate Increases Justifiable?

The reasons given by the credit companies for the interest increases are not realistic or justifiable. If the increases are aimed at the high risk customers then reliable customers should not be penalised. The credit crunch has also taken its toll on the credit companies but their profits are still high. The increased credit card rates simply looks like another unfair business tactic designed to swell the profits of the credit companies.

Combating the Credit Card Rate Rise

Good credit card customers are well within their rights to fight against these unjustifiable rate increases. Steps that can be taken will include:

  • Calling the credit card provider to complain about the interest increase
  • Explain to the provider that the increase is not justifiable if the customer has a good credit record
  • Ask for the interest rate to be lowered
  • Threaten to switch to another provider
  • Threaten to report the matter to the Financial Ombudsman
  • Close the account and repay the balance at the current interest rate

New Credit Card Regulations and Interest Increases

New credit card regulations may be effective in reducing the increased interest rates. Under the new regulations credit card companies cannot raise rates within one year of opening an account. The credit companies are then only permitted to increase rates once every six months. If the credit company has broken either of these rules the issue can be taken to the Financial Ombudsman to be resolved.

Closing and Clearing a Credit Card Account

The new credit regulations permit credit customers to shut down their accounts and repay the balance at the current rate. Under the new regulations customers are to be given a ‘reasonable’ amount of time in which to clear their balance. For customers with large balances it may be a cost effective option in the long run. The alternative can of course be to switch and transfer to a lower interest rate credit card. This option will usually only be available to customers with good credit records.

Will the Credit Companies Reduce the Interest?

Whether or not the credit provider reduces the interest will depend on a few factors. The customer’s reliable account conduct will be a major factor. If the customer has other financial products with the credit company then this may also sway their decision in favour of the customer. For customers with good credit records it is important to fight the interest increase and not to back down. Do not be fobbed off with excuses from a call centre representative who will not have the authority to make this decision.

Credit card customers should be angry at interest rate increases. Loyal customers should not be penalised for customers who cannot manage their debts. Credit companies are also falling foul of UK regulations that forbid raising the interest on customers who already seriously in debt. Fighting back against these credit hikes is the only way to stop credit companies from exploiting their customers.

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