News & Views - Savantor

Which rate is best?

Wednesday, 16 September 2009

Banks have again been criticised by a report in the Sunday Times indicating that despite the Bank of England maintaining base rate at 0.5% for the sixth consecutive month, rates charged to customers particularly on credit cards are increasing rapidly.  The report quotes RBS increasing the rate on its Classic card by 4% to 16.9% and another report by Moneyfacts, shows the average interest rate charged on credit-card purchases is 18.1% APR.  Obviously this looks bad compared to 0.5%.

The trouble with averages is they hide some of the reasons behind the figures.  The highest rates charged are unsurprisingly by the likes of Vanquis at 39.9% but as these cards are aimed at the high risk sub prime market then a premium rate is likely to be charged.  At the other end of the scale there are the 0% rates on balance transfers although many of these charge a fee and they are less popular with issuers than they were.  Virgin usually come out top of these cards offering for example 16 months 0% with a BT of 2.98% and a standard APR of 16.6%.  Then there are those in the middle like Barclaycard Simplicity with no frills but an APR of 6.8%.  Now we could be moving in a slightly different direction with the launch of the Platinum Plus credit card from MBNA. This is not a 0% card. Instead it offers a low balance transfer rate of 1.9% APR for 12 months, with no balance transfer fee. 

The highs and lows didn’t get mentioned in the reports in the press but it will be interesting to see what happens as far as cardholder behaviour is concerned.  Will it see a return of the ‘rate tarts’?

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