More than half of credit card providers have hiked up rates and charges in the past year despite the official interest rate hitting an all-time low.
According to a recent investigation by Which?, a shocking 64% of 42 major credit card brands have bumped up rates or other charges in the past 12 months.
Offenders include well-known names such as Royal Bank of Scotland, NatWest and HSBC. Other providers, such as American Express and Egg, have hiked up rates for existing customers, although this is harder to measure as it’s on a case-by-case basis.
Latest complaints statistics from the Financial Ombudsman Service also paint a gloomy picture, with the number of complaints about credit cards increasing from 2,731 in 2006/07 to 18,590 in 2008/09 – a whopping 600% increase.
This is despite the all-time low Bank of England base rate (0.5% since March) and new principles introduced in January that were meant to protect consumers against unfair rate hikes and inflated charges.
The new rules mean card providers are no longer allowed to put up the rate in the first year of someone holding a card and after that they can’t increase it more than once every six months.
In addition, if a provider wants to increase interest rates, it has to give the customer at least 30 days' notice so they can make other arrangements if they wish to. Customers who have suffered rate hikes are now allowed to cancel their cards and pay off their any outstanding balance at the old rate.
However, the problem with these new principles is that there is currently no limit on how much credit card providers are allowed to hike up rates by. This not only exposes customers to massive overnight price hikes but also means they can sneak in smaller hikes every six months.
The credit card industry defends the new rules, and claims it would be 'anti-competitive' to introduce a cap.
But Moneywise is concerned that the rules are still not fair on consumers. That is why we have produced a special Moneywise TV report on credit cards and the impact rate hikes have on normal people.
The report will be available to watch from Friday 16 October on our Moneywise TV page.