Banks have a knack of making money, well most of the time, but this is a credit card holders nightmare waiting to happen. The banks in question ironically enough are 2 of the biggest bail outs in banking history this country has seen, Halifax and RBS. Now bare in mind that these banks used public money, to get out of trouble, now it seems to repay this debt, they will be using public money again, yours and mine. To say it’s a cheek is an understatement, but then they are banks, I think the slang name for banks these days are gangsters.
High street bank Halifax announced that it is linking the rate that credit card holders pay to Bank of England interest rates.
It means that a typical Halifax credit card rate of 18 per cent will automatically increase by 0.25 per cent if the Bank Rate increases by that amount.
The controversial move has been condemned by industry experts because the Bank Rate is at a historic low of just 0.5 per cent and is expected to rise to 2 per cent by the end of next year.
It will be a fresh blow to struggling households who have seen their budgets stretched to the limit by the rising cost of living.
The bank is accused of profiteering, having not reduced its card rates in line with the dramatic fall in the Bank Rate during the credit crisis. It dropped 4.5 per cent within six months from the beginning of October 2008.
The average purchase rate on a credit card was 16.8 per cent three years ago, when the Bank Rate was at 5 per cent. Today it is 18.1 per cent.
Halifax and Bank of Scotland insisted the decision was aimed at “improving transparency” for its customers. Other banks are expected to follow and announce similar changes to their rates.
But Andrew Hagger, of personal finance website Moneynet, said: “While the move may be veiled as transparent, pricing in future base rate movement when rates are at the bottom of the cycle is a sure fire way of driving up future profits.”
He continued: “It is quite a rarity to find a credit card linked to Bank Rate and worryingly this move by Halifax could be seen as a profitable blueprint by other card companies.
“We haven’t seen credit card rates fall from the time base rate was at 5 per cent with providers using the excuses of higher borrowing costs and increased risk as reasons not to reduce – now they are moving the goalposts to take advantage of rate rises that are likely to occur over the next 12 to 18 months
“If you pay your card off in full each month then this isn’t an issue, but for those already struggling, it looks like higher borrowing costs are just around the corner.”
Ken Stannard, director of credit cards at Halifax, said: “Our rates our among the most competitive in the market and below the industry average. This move is about pricing in the most transparent and simple way possible. We are the only credit card provider where customers will know exactly at what point there rate will move, up or down.”