There are two situations a credit card can increase your interest rate:
If the Bank of England base rate goes up and your credit card tracks that rate
When your credit card decides to increase your interest rate.
It is important you know what is happening when your interest rate rises, as in the second case you have the right to reject this change.
Base rate changes
Many credit cards now track the Bank of England base rate, but not all do. Your credit card T&Cs will say if your card does.
Here the standard interest rate on the card will increase automatically as the base rate changes. The new rate will be shown on your next credit card statement.
These changes only apply to standard interest rates. They won’t affect you while you are on a 0% balance transfer or any other promotional rate. They also won’t apply if you are on an installment plan to help you repay the card balance more quickly.
The Bank of England base rate was increased several times by between 0.25% and 0.75% last year and was increased again in January 2023 by 0.5%. Each of these changes is small, but they are starting to add up to a significant amount.
You don’t have a right to reject an increase caused by a change in the base rate.
But see below for what your options are if you are finding it difficult to pay the card each month.
Difficulty making the card repayments?
If your credit card repayments have been causing you problems, this gets worse when the interest rate goes up as this makes the minimum payment a bit larger.
So this is a good time to think if you need some extra help:
if this card is your only problem debt, you could talk to the lender about a payment arrangement, where interest is frozen;
with other problems as well, or if you don’t feel up to talking to creditors about your difficulties, talk to us or complete our Debt Calculator to see if you can get help with a debt solution.
Payment arrangements and debt solutions can both harm your credit score, but they are practical ways of clearing too much debt with the interest being frozen. And then you don’t have to worry about any more interest rate increases!