Do you have credit card debts? If, like millions of other people, the answer is yes, then you should expect significantly higher interest rates in the near future.
Banks such as Halifax have already changed, or are in the process of changing, their interest rate structure to closely follow the movements of the Bank of England's base rate. When the base rate increases, your interest rates could sky-rocket.
Michelle Slade of MoneyFacts.co.uk says, “Consumers could be in line for a shock rate rise, especially given the herd mentality of the banks. When one of them makes a move, the others tend to follow.”
From November, a typical Halifax credit-card rate of 18 per cent will automatically rise by 0.25 per cent every time the bank rate increases by that amount.
Halifax said that the majority of its customers would see the interest rate they were charged fall or stay the same but admitted some would face an immediate small increase.
While some will pay a lower rate of interest initially, they will pay more in the future when rates do eventually start to rise.
The banks say this is an effort to make their charges more transparent, but we suggest that you get your credit card debts paid off as soon as possible before your rates get any higher.
Andrew Hagger at Moneynet.co.uk says, “If you have got a credit card balance that you are trying to shift then it’s wise to pay off as much as you can while the base rate is low. Once it increases we will no doubt see higher credit card rates too.
“When rates go up, the interest charges will take a larger bite out of your monthly repayment.
“The credit card market remains extremely competitive but only for those with an excellent credit history, however, if you’ve missed a couple of repayments or failed to make them on time, you’re likely to be excluded from the latest long-term zero per cent offers.”
