Banks Aim To Claw Their Money Back
October 18, 2007
Banks are determined to make up ground they have lost with capped charges. Some banks have increased credit card and overdraft interest rates by far more than July’s 0.25% base rate rise.
Two banks have increased charges on credit cards by 5% rise over only a month on cash withdrawals. Authorised overdrafts have also soared – some by 3.4% in a year, yet interest rates have only gone up by 1.25% in that time.
Banks are still smarting at being forced to refund credit card and overdraft penalty charges. Barclays, Halifax, HSBC, Lloyds TSB and RBS-NatWest have already set aside £400m in compensation between them, and they are trying to make that back in any way they can.
Lloyds TSB made nearly £2bn in profits in the first six months of this year, yet the overdraft rate on is Classic Account has been increased by 0.3% from 19% to 19.3%, and on its Classic Plus account the rate has gone up from 18.6% to 18.9%. Lloyds also raised the overdraft rate by 0.3% after May’s quarter point base rate rise. Over the last 12 months the rate on the Classic Account has gone up by 3.4%, from 15.5% to 18.9%. Classic Plus account holders in the black are not immune. Currently they get 3.4% in interest before basic rate tax on balances up to £5,000, but from 29 August this will only be earned on balances up to £2,500.
Lloyds TSB have also increased the commission charge on their debit card when used abroad, up from 2.75% to 2.99%.
The overdraft rate on Bank of Ireland’s (Great Britain) high-interest current account has gone up by 0.3% from 20.15% to 20.45%. The unauthorised overdraft rate on this account has rocketed by 0.34% to sky-high 39.49%.
The best overdraft interest rate is Alliance & Leicester’s Premier Direct account which offers 0% in the first year, then 5.9%.
Halifax’s commission charges on foreign credit card transactions has gone up from 2.75% to 2.95%, and it has also increased the cost of cash withdrawals cash from 2.5% to 3%. The purchase rate on its web-based One card, with a nine-month 0% purchase and balance transfer offer, has gone up by 4% from 9.9% to 13.9%.
Nationwide Building Society has increased the interest rate on credit card cash advances from 18.9% to 22.9% on its Gold, Cash Reward and Comic Relief cards. Nationwide’s Classic card’s rate has gone from 21.9% to 22.9%, and the fee for a cash withdrawal is up from 2% (minimum £2) to 2.5% (minimum £3).
Nevertheless, Nationwide does offer some of the best credit card deals as it doesn’t charge commission if you use your card for spending overseas.
Clydesdale and Yorkshire banks are putting interest rates on Gold cards up by 1% from 14.9% to 15.9% from September, and the rate charged for cash withdrawals on both will be going up from 19.95% to 24.95% - a increase of 5%. If you have a Marks & Spencer store card but don’t pay off you bill in full your interest is going up from 19.9% to 23.9%.
Alan Wright
18th October 2007
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