Rivals to follow Bank of Ireland on card hike
Published 20/12/2012 | 05:00
THE move by Bank of Ireland to hike its credit card rates will spark a new round of rises by rivals.
Tens of thousands of the bank's customers have been hit with a crippling interest rate hike on their credit cards just days before Christmas.
Taoiseach Enda Kenny admitted the Government cannot stop banks hiking credit card interest rates.
And consumers are carrying so much debt on card accounts that they cannot switch to another provider, so are sitting targets for increases by banks.
The increase of up to 4pc on Bank of Ireland credit cards will heap more debt on shoppers who have already stretched themselves on festive spending.
Mr Kenny said bank credit cards rates was an area "that is not regulated by government".
"This is very difficult for many people who have run up huge bills at Christmas," he said.
Mr Kenny said the Government only had a 15pc shareholding in the bank.
"I don't like this decision made by the bank three or four days before Christmas. It's not easy for people not to run up bills on credit cards," he said.
It is estimated that as many as 400,000 Bank of Ireland card holders will be affected. The hike takes effect during Christmas week. It will cost someone with the Clear card around €50 in higher interest charges.
Now other card providers are set to follow the lead of Bank of Ireland, according to finance expert Simon Moynihan of price comparison site Bonkers.ie.
AIB's Click card has now emerged as the cheapest with a rate of 13.6pc.
"We will now see the other banks and card providers pushing up their rates," Mr Moynihan said.
He said cardholders were easy prey as most people cannot switch provider. Some six out of 10 applications for new cards are being refused at the moment, particularly for those carrying debt on their credit card account.
And MBNA, which was recently bought by US asset management group Apollo Global Management, is not issuing cards to new customers at the moment.
The average debt on personal credit cards works out at €1,300.
Mr Moynihan calculated that if the main banks all raise their card rates by 4pc they could generate an extra €100m in profits.
"This means that all the banks will be looking at increasing interest on cards," he said.