Interest Rate Hikes for MBNA Customers
There has been a flurry of complaints surrounding the sharp and unexpected increases in rates of interest payable by users of MBNA credit cards. To make this look slightly more devious, this is tending to take effect around the time that customers come to the end of their introductory low or zero rated interest periods. So customers expecting to revert to the standard rate of 15% after a 6 month introductory rate of 0%, might find themselves facing a rate as high as 29%. What is also confusing matters is that customers are only presented with the monthly rate of interest on their statements rather than the annual percentage rate. So while the former may look reasonable at 2.52%, the reality comes out at an APR of nearly 35%.
Around 7 million of us own and use credit cards which have been issued by MBNA. They are usually branded with a popular high street bank, retailer or corporation such as Virgin or Sony. However it does not appear to be only MBNA guilty of significant increases, and Moneysupermarket.com report that 31% of respondents to a recent poll indicated that their APR had been hiked in the previous 12 months.
Credit providers have the right to make changes to your account at any time. Provided you are not on a low or zero interest introductory fixed rate, they can increase your interest rate, reduce your credit limit, demand immediate repayment and withdraw any associated benefits of services. Moreover, they can do this with less than one month’s notice. This may seem very unfair, especially when we are talking about APRs of around 34%. But what makes it worse is these hikes can put immediately put people over their credit limit, which will also incur further charges. However, the OFT have stated that any fee must accurately reflect costs incurred on the credit provider’s behalf – so if you feel it is unjust, get on the phone as quickly as possible and politely request the fee be scrapped.
So why do credit providers up the APR in this way? It’s often due to their concerns over your credit-worthiness – you may not have been paying very much off the debt, or you may have been late paying. So to avoid the credit provider pulling the rug out from under your feet like this, ensure you are paying back more than the minimum amount each month and doing so on time. If it’s too late and the rug has been well and truly pulled, the only options are to pay the debt in full, or more realistically, do a balance transfer to an alternative 0% interest rate card provider. But do bear in mind that this is not free, and there will be a fee of 2-3% of the debt moved across. In any case, always ensure you check all your credit card documentation to find that all important APR so you can see what the repayments would be for the life of the debt, rather than what they would be for that month alone.
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I paid off all my Credit Cards in one foul swoop in March 2007, but decided to keep the one which offered me the best deal. No suprises it was virgin MBNA that offered me 11% apr for 1 year. That seemed very good at the time and although my gut feeling said “no dont stick with these guys” I kept the card, and slowly spent away on it as they slowly increased the credit limit throughout the term of one year. Since the initial year they have hiked my rates up 3 times, lastly being in September 2008 to 34.9% apr. I wrote a letter of complaint and finally received a final responce this morning which includes the line “Regrettably, we are unable to reduce the interest rates on your account. Currently this is the most competitive rate we are able to offer.”. Oh how I laughed! It’s no wonder Mr Virgin has his own island, as part of it must surely be mine.
I will obviously try to pay it all off and close the account, but of course they have you by the short and curlies. They must credit check you periodically in order to increase your limit, so they know when your NOT gonna get any more credit – then bang the rates up.
DONT GET A VIRGIN CARD PEOPLE!
MBNA has hiked my interest to 34.5% after a balance transfer! I only noticed it 6 month later as I have been doing a direct bank payment. I wrote to them and they replied saying that under my current circumstances which they are able to discuss, they feel that’s the right interest rate, if I want to know what has affected my rate, then I need to contact Experian! As it happens I am an experian subscriber and my rating is in the 10% of the highest nationally, and a squeaky clean record of payment for the last 10 yr., I have decided that I don’t trust them and paid off £8k from my bank account and as soon I have the rest I will settle it and close my account! People should remember these kind of abuse by banks like MBNA and should avoid them and discourage friends and family, so far I have encouraged 3 of my colleagues to give up their card, in face of greed just like many other bank, I hope MBNA goes bust just like them!
totally agree with the above. i was late by 5 minutes with an online payment and they took my promotional rate of me. rang them and they said there was nothing they could do. i now have to pay £237 a month interest alone on a 9,000 bill dont know what i am going to do! can anyone give me any tips?