Capital One credit card interest rates to double

By Elliot Wright, 9th February 2010

Capital One credit card users have been warned of a massive 7% hike to the interest rate on their existing debts.

The lender has written to customers informing them the rate charged on outstanding credit card balances will nearly double from 8.01% to 15.31%, effective the day after customers receive their March Statements.

Capital One argued the increase was necessary due to the weak "economic environment" but the decision has sparked fears that interest rates for millions of further credit card holders will soar as financial firms look to boost revenue in response to the rising numbers of customers defaulting on their debts.

Some credit card providers, including MBNA and Royal Bank of Scotland, have already increased the interest rates charged to new customers who fail to clear their balance at the end of the month.

David Black, of Defaqto, the financial information provider, said: "There is little appetite for more unsecured lending, including credit cards, amongst providers at the moment.

The interest rate charged on outstanding credit card balances will nearly double from 8.01% to 15.31%

"In the coming months we will see interest rates rise, more cards with annual fees and shorter introductory offers for new customers."

A Capital One spokeswoman said: "The economic environment has changed dramatically and we must adjust rates to account appropriately for the increased risk of lending to consumers in an economic downturn.

"This significant downturn means that we have had to increase rates for some of our customers by up to 7 per cent."

Customers not wanting to switch to the new interest rates have the option of paying their outstanding debt at the original rate as long as they do not make any new transactions on the account.

Claims Financial