http://money.guardian.co.uk/news_/story/0,1456,1582393,00.htmlJill Treanor
Saturday October 1, 2005
The Guardian
Barclaycard's 9 million customers face sharp rises in their interest charges because the credit card company has decided they are becoming less likely to pay back their debts.
Britain's largest and oldest credit card business is increasing its rate of interest by as much as two percentage points, even though the Bank of England's official rate is falling. The official base rate was cut from 4.75% to 4.5% in August.
Barclaycard has made the decision to implement the rate rise at a time when the credit card industry is under close scrutiny by the Office of Fair Trading. The OFT has ruled that the card providers should cut the default charges levied on customers who fail to pay on time, exceed their agreed credit limit or pay with a cheque that bounces. These charges can be as much as £25 a time.
... A spokesman admitted that the bands represented a two percentage point rise for some customers. A customer who might once have been charged 12.9% will be moved to 14.9%. He confirmed that the two percentage point rise was larger than the company would usually implement. He said the rise was needed to "reflect market conditions". "We recognise that interest rates have gone down but the risk of lending to people has gone up," he said.
... The increase in interest rates prompted one Barclaycard customer, who asked to remain anonymous, to ask the company whether the move had been to protect profits. "I find it hard to believe that 'risk' is the entire motive and it would seem that it forms part of a strategy to increase profits," he said in a letter.
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