Halifax credit card pricing
Halifax has announced a range of changes to the interest rates it charges on credit cards for existing customers. This leads the market in providing greater transparency, making it easier for customers to manage the cost of their borrowing.
There are three key changes:
Halifax is simplifying rates by introducing one single personal rate specific to individual customers and how they use their card.
In addition customers' interest rate will be linked to the Bank of England base rate. This is a measure that customers recognise and provides better clarity over how their rates may change as funding costs grow, or reduce.
This means that customers' annual interest rate will be made up of the single personal rate plus the Bank of England base rate.
Finally, Halifax is outlining the circumstances when it may reprice a customer's personal rate in the future and will give clear reasons as to why they have changed a customer's personal rate; this will help customers take control of their account to avoid future rate rises.
One simple personal rate
From August 2011 existing customers will be moved onto a single rate of interest, which will be personal to them. As a result there will no longer be different rates charged for purchases and cash withdrawals. This will make it easier for customers to understand the interest being applied across their account.
Customers' new personal rate will be an average of the current standard interest rates applied to the balances on their credit card between January and March 2011. For example a customer with an outstanding balance that is purely on retail transactions over this period will see their personal rate set at their purchase rate, whereas a customer who has outstanding balances that are made up of a combination of purchases and cash withdrawals will see their personal rate move to an average of the rates applied across these balances.
As a result of these changes the majority of customers will pay less interest, exactly the same amount of interest each month or less than two pence more for every £1,000 they borrow. Customers will still benefit from promotional rates, such as balance transfer offers.
Standard rates linked to bank of england base rate
Additionally, as part of these changes customers' new standard rates will be linked to the Bank of England base rate from November 2011. This means that customers' interest rates will be made up of their personal rate plus the Bank of England base rate. By linking credit card pricing to the base rate, Halifax is using a measure that is easily recognisable to customers, which will reflect any movements in pricing, up or down, in a completely transparent way.
Clearer signposting for future rate changes
Finally, Halifax is committing to clearly outlining where they may reprice a customer's personal rate in the future and giving clear reasons as to why we may have moved their rate. This will lead the market in addressing transparency, whilst also helping customers avoid future rate rises by calling out the behaviour that could impact their interest rates in the future.
From October they will set out typical examples of what could cause a future reprice in the terms and conditions and on customers' statements, which will include:
A customer has not kept to the conditions of their credit card account; that is they have missed several payments or have gone over their credit limit multiple times.
The transactions made by type, value and frequency indicate riskier behaviour, such as an increase in cash withdrawals.
They haven't kept to the conditions of another product they have with Lloyds Banking Group.
There has been a change to their financial status as recorded with external credit reference agencies.
We experience or anticipate changes to the cost of running our business. This could be due to changes in operating costs, such as having to hold more regulatory capital.
Similarly if they reprice a customer's interest rate, either up or down, then they will explain the exact reason for any change. Customers will have the option to close their account and keep their existing rates.
Ken Stannard, Director for Credit Cards, Halifax, comments: "This is straightforward and fair pricing, which will give our customers far greater transparency and control over their interest rates. Our customers tell us that one, simple rate makes it easier to understand their credit card, and they want to better understand how and why their interest rates may change. These three measures will provide customers with more clarity and predictability of the interest rates that will be applied to their account."
Existing credit card customers will be written to in May 2011 with details of the changes and how they will personally affect them. New customers and Clarity card customers will not be included in the changes initially, but will be notified separately and moved onto the new pricing structure in 2012.