Credit card holders are the banks’ latest victims

Written on February 22, 2010 – 2:36 pm | by admin

A series of body blows to savers, borrowers and consumers was dealt by the Government, banks and credit-card providers in a matter of days.

The news that average credit card rates hit a 12-year high was the first shocker, given that it coincides with the lowest ever Bank Rate of 0.5pc. Yes, you might have been forgiven for thinking credit-card rates should be falling as the cost of borrowing hits a nadir. But that’s because you live in the real world, not the make-believe one of financial services companies, where rules are made up as they go along and smoke and mirrors are used to confuse customers into coughing up more cash than they should.

Rates have been creeping up gradually, but not across the board. Instead, providers have been singling out certain types of borrowers and lifting their rates out of the blue, which makes it harder to detect their wrongdoing. At first, it was thought those customers deemed to be a high risk were being punished for missing payments and going over their limit. This is hard to justify as they already get hit with penalties for this.

But then again these penalties have been capped at £12 by the Office of Fair Trading, which put a squeeze on the ability of credit-card providers to bring in more revenue. So maybe we have all been a bit naïve in thinking the banks and credit-card firms would accept this loss of income. Of course they haven’t. Instead, they have clawed this money back elsewhere, and have decided ”rate jacking’’ is the way to go. So if you behave yourself and pay your bill on time and don’t go over your limit you’ll be safe, right? Wrong.

It’s not just potential bad debtors who are being hit with higher rates – those with excellent credit records are also being targeted.

So is the answer to find some middle ground – miss the odd payment every now and again and go over your limit once or twice a year? Sadly this isn’t a fail-safe tactic either. They will still get you.

The most reliable solution would be to phone your credit-card firm, complain about the rate rise and then threaten to leave if they don’t back down. Just as we came to terms with this, we heard the cheery news that inflation was still heading north, just like the bumper profits at Barclays. Prices are now rising at 3.5pc for the average British household, which isn’t exactly the best timing given we’re shaking off the effects of a recession, struggling with unemployment and seeing the unjustified rise in the cost of borrowing.

Like a naughty schoolboy, Mervyn King has to write to Alistair Darling if inflation is more than one percentage point outside the Government’s 2pc target. Although he claims this rise is ”temporary’’ – partly due to VAT going back to its original level – critics are not so sure.

Maybe if it happens too often Mr King will resort to text messaging Mr Darling, saving time and money. ”Hi Al. Sorry I did it again m8. Merv’’ might be the quickest way to pass on the bad news to the Chancellor.

Whatever happens to inflation, the real victims are savers, who have seen savings account rates plummet. They have spent a lifetime putting money aside and now are fighting a losing battle to get a real rate of return. Meanwhile, the bankers who brought the world economy to its knees seem to be just as keen as ever to grab their bonuses and carry on as if nothing had happened.

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