Virgin Money hikes credit card interest rates
Virgin Money has increased the interest rate on credit cards for some of its customers from 16.8 per cent to 24.9 per cent.
Following criticism of the move, the bank unsympathetically told the customers to either accept the increase, which amounts to nearly 50 per cent, or pay off their balances.
The rates on balance transfers have also been increased, from 18.9 per cent to 27.9 per cent.
According to Virgin Money, the changes are part of a routine review of credit risk, and are unrelated to its takeover of Northern Rock.
Thousands of customers received letters informing them of the increased rates last week, following a review of their performance with the bank and external credit risks factors.
Customers were given 30 days notice of the rises and they have 60 days inform the bank if they do not accept them.
The latest figures from the Bank of England show that lending rates have reached an all time high, despite the base rate being at an all time low of 0.5 per cent.
The average interest rate on a Standard Variable Rate mortgage was 4.16 per cent in January.
This means that the gap between the interest being charged on the average mortgage and the Bank of England’s base rate is 3.66 per cent - the greatest since records began in January 1995.
The average lending rate on overdrafts has increased to 19.5 per cent and the average interest rate on credit cards is 17.3 per cent.
Although lending rates are soaring, savers are receiving extremely low interest rates.
In January, the average interest rate on a deposit account was just 0.2 per cent.
The British Bankers’ Association’s said that the increased gap between the base rate and rates that banks charge borrowers reflects higher funding costs for banks due to the credit crisis and the uncertainty in the euro zone.
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