Nationwide Building Society has been accused of ‘rampant profiteering’ by ratcheting up the cost of credit cards even though the Bank of England is putting interest rates down.
The society, Britain’s biggest by far with 17 million members, is warning that rates on five major cards – Member, Select, Nationwide, Gold and Classic – will see costs leap in April, in some cases by 30 per cent or 50 per cent.
Typically, that means rates are going from 15.9 per cent to 20.9 per cent. Some on cheap deals will see rates jump from 9.9 per cent to 14.9 per cent.
Rates for new credit card applications are at a maximum of 24.9 per cent, even though the Bank of England just cut headline interest rates from 4.75 per cent to 4.5 per cent. City economists expect rates to come down further, perhaps to 4 per cent, by the end of the year.
Some banks and building societies have already responded to this by cutting savings rates.
Card sharks: Nationwide is warning that rates on five major credit cards – Member, Select, Nationwide, Gold and Classic – will see costs leap in April, in some cases by 30% or 50%
So far, no other banks or building societies have put up credit card costs in such a blanket fashion, according to financial data analyst Moneyfacts, though some have put borrowing costs down.
Nationwide took over Virgin Money in October last year but remains a mutual and owned by its members.
James Sherwin-Smith, managing partner of Sortcode Capital, who represented members during the takeover, says: ‘Nationwide is widening its profit margins at a time of stress for many of its members, perhaps giving cover to banks to do the same. It is rampant profiteering and I cannot see how they can justify this move.’
Nationwide responded: ‘We are not immune from the increased cost of providing and maintaining credit cards and we do need to increase some of our lower interest rates. Our average APR will remain significantly below the market average.
‘We will not apply increases to those in or near financial difficulty, or those who have been in debt for a long period.’
The society said that inflation was behind the rise in the cost of maintaining cards. A letter from Nationwide to members warns that the rise of 5 percentage points will increase costs by 42p for a £100 balance that is not repaid every month.
That comes on top of rises in energy and broadband costs for already stretched family finances.
In contrast, other lenders have boosted their offers lately. Lloyds Bank says: ‘Card pricing is almost entirely base rate linked, so has gone down, broadly, following the latest Bank of England decision. As a responsible lender, we may review customers’ individual pricing – so it can go up or down.’
Rachel Springall, finance expert at Moneyfactscompare.co.uk, says: ‘Consumers looking for an interest-free credit card may be pleased to see a few providers have improved their offers.
‘One of the new deals this week is from Barclaycard, which sits as the longest 0 pc purchase offer at 23 months, but also boasts a 20-month balance transfer deal.’
Sherwin-Smith, who backed a failed attempt to force a member vote on Nationwide’s £2.9 billion takeover of Virgin Money, fears Nationwide is moving away from its mutual roots.
‘Long-standing Nationwide cardholders face higher rates. Mutuality should mean lower prices, but instead members are getting the same treatment as customers of a profit-maximising bank. I wonder where Nationwide is going with this,’ he said.
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