HSBC’s sister bank will increase the interest rates offered on credit card purchases, balance transfers, and money transfers from April
First Direct will be hiking the interest rates on its credit card products within weeks.
HSBC’s sister bank will increase the interest rates offered on credit card purchases, balance transfers, and money transfers from April – with the annual percentage rate (APR) going from 19.9% to 24.9%. On every £100 owed, this hike will add an extra 35p each month.
However, cash transactions will see a slightly larger increase. The APR charged for those making cash or cash-related payments, including withdrawals, will rise from 24.7% to 29.7%. This will add an extra 33p per month for every £100 you owe.
The changes will not impact you if you pay off your full balance each month, and according to First Direct, customers will continue to get up to 56 days of interest-free credit on their purchases. If you are in an interest-free period, then you will not be affected by the changes until your deal expires. The online bank says customers who are not happy with the changes can close their accounts without penalty before April 11. However, they must repay their existing balance at the current rate before the account can be closed. After April 11, the new rates will apply.
First Direct has not confirmed the reason behind the hike in borrowing costs for customers and the move comes as the Bank of England is poised to cut its base interest rate next week. The Central Bank has cut its base rate twice since August last year, and 60% of economists polled by Reuters believe the Bank could cut rates four times by the end of the year. This could potentail taking the rate from the current 4.75% to 3.75%.
The Bank’s base rate influences what banks and lenders charge you to borrow money. The base rate mainly affects mortgages, credit cards, and loans. When the base rate goes up, these become more expensive. and when it comes down, it should become less.
Alastair Douglas, chief executive of TotallyMoney said: “Although interest rates are expected to come down this year, as the government pushes the Bank of England to help grow the economy, there’s a good chance that we might not see like-for-like benefits being passed on to consumers. It’s also likely that as people continue to struggle with the increased cost of living, and three in five adults expect their finances to get worse this year, that we might see an increase in late payments and defaults on credit agreements.”
Rachel Springall, finance expert at Moneyfactscompare.co.uk, added: “Lenders traditionally reassess the rates they charge on debts as a reflection of their attitude to risk, as when the risk of defaults is elevated, the cost to borrow would usually rise.”
