The rate-jacking rip-off
When the base rate is at a record low, you might think that credit card interest rates would be falling. But for too many people, the reverse has happened. Check out the results of our recent lovemoney.com poll.
I often think of the credit card industry as a war zone. On one side, the credit card companies are trying to extract extortionate profits from consumers via ruses such as 20 per cent interest rates and negative payment hierarchy.
On the other hand, savvy consumers are able to borrow cash at 0% and get cash back on their purchases as long as they tread very carefully through the minefield of credit card terms and conditions.
The credit card companies’ latest ruse has been ‘rate jacking.’ Let’s say you transfer £1000 of debt to a 0% balance transfer card. The 0% period is 15 months. When the period expires, you’ll be charged the card’s normal rate which might be, say, 17 per cent.
However, over the last year a disturbingly large number of people have found that they’ve been charged a higher rate than they expected when the 0 per cent period ended. That 17 per cent charge has been jacked up to 20 per cent. Sometimes that increase has been for all customers of the card, other times, the increase is only imposed on a smaller section of the card’s users.
When rates are increased only for some users, card companies claim they’ve done this because they’ve realised that those users are a worst risk than they had previously realised. But this is patent nonsense. The card companies shouldn’t need to increase rates when the base rate has been at a record low for 18 months. The truth is that the card companies are being forced to wind down some of their other rip-offs and have been looking for new ruses to generate cash.
So we thought we’d run a poll to find out whether our readers have been affected by ‘rate jacking.’ We focused on readers who have had a 0 per cent card expire during the last year. 43 per cent said that when the 0 per cent period ended, they were charged a higher rate than the one they originally signed up to.
That’s a pretty shocking stat and it shows that the credit card companies are going to do their utmost to come up with new ways to make bumper profits from plastic. Here at lovemoney.com, we’ll keep a close eye on them......