By Sean Poulter
21st November 2009
Christmas shoppers will be affected by the interest rate rise
Credit card firms are pushing up interest rates by as much as 7 per cent ahead of Christmas.
The move by Capital One means some customers will be paying almost 40 per cent interest on their Christmas gifts and January sale purchases unless they clear the balance on their cards.
The American-owned finance giant said the rises were to reflect the higher risk of certain customers and 'market conditions'.
But there are concerns that Capital One, which has 4million British customers, will be followed by other banks.
The decision has angered customers, who described the increases as 'legalised extortion'.
It also makes a mockery of claims by Gordon Brown, Lord Mandelson and other ministers that they would ensure credit card firms treat customers fairly.
For someone with a balance of £1,000, making the minimum repayment of £5 a month, the total interest bill will triple from £3,032 to £9,547.
Someone paying off £100 a month will see interest rise from £126 to £154.
It is the second time this year that Capital One has 'rate-jacked' customers it considers high risk.
The average interest rate across the industry is 18.1 per cent and looks likely to rise further, even though the Bank of England base rate is expected to be held at a historic low of 0.5 per cent until well into next year.
