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Banks set to hike credit rates in new cards rush

BANK of Ireland and AIB are planning to increase credit card rates as it was revealed that financial institutions are cherry-picking their customers.

It was revealed that 60pc of applications are being refused as thousands scramble to change providers.

Over 50,000 Halifax card holders now need to find a new provider by May as the group shuts its operations in Ireland.

But AIB, which received a €3.5bn bailout from taxpayers so far, is expected to hike interest rates in May and Bank of Ireland will follow suit in June.

AIB's Click card rates will jump from 8.5pc to 9.5pc, from 11.5pc on its Platinum to 12.5pc, and from 14.9pc to 15.4pc on its MasterCard.

The rate for purchases on Bank of Ireland's 2in1 card is set to rise from 13.9pc to 14.9pc, and cash withdrawals interest will move from 17.4pc to 23.2pc.

On the Clear card, the purchase rate rises from 9.5pc to 10.9pc, with the rate for withdrawing cash on the card jumping from 19.9pc to 23.2pc.

Other credit cards issued by both banks are not affected.

Separately, Bank of Ireland is planning an increase on interest rates for personal loans, overdrafts and student loans next month.

A spokesman for the Irish Banking Federation said that it was not surprising to see a reduction in credit card applications being approved as it reflected a reduced capacity of people to meet their repayments, due to the downturn.

Meanwhile, prepaid credit card providers said that there has been a huge jump in applications due to the number of rejection rate by mainstream credit card providers. There are no credit checks involved in getting a prepaid card.

Prepaid card issuer 3V representative Kieron Guilfoyle said that there was a 47pc growth in its business last year and more people took out virtual cards instead of physical credit cards.

He said that six out of 10 applications for new credit cards and from those wanting to switch were being turned down.

Earlier it was revealed that AIB will raise mortgage rates by 0.5pc before the summer which will add around €65 a month to repayments on a typical €250,000 home loan over 25 years.