Increasing the interest on a credit card – your rights

There are two situations in which a credit card can increase your interest rate:

1. your credit card decides to increase the rate
2. the Bank of England base rate goes up and your credit card tracks that rate.

1) The lender decides to up your rate

Credit cards can also change your interest rate for other reasons – this applies whether your card tracks the base rate or not.

These changes tend to be larger than the small base rate changes. Here are some examples:

• Halifax have increased my rate from 24% to 28%
• Lloyds are putting my card interest up from 24% to 27%. I thought rates should be dropping in 2025!
• In 2023, PayPal moved its lowest interest rate from 21.9% to 23.9%. And some customers were also moved into a higher rate category, so their rates went up to 25.9% or 29.9%
• I got a notice of credit card interest increase from  118 Money, from 29% to 41%. 
• We are writing to let you know that the annual interest rate on your Zable Card is increasing from 38.9% to 48.9% .

These jumps are legal. But you have the right to reject them. The regulator sets this out in CONC 6.7.13.

The email or letter you receive states this, but many people don’t notice it. Or they misunderstand it, as the card company hasn’t said clearly how it works.

The letter often says something like “you can reject the increase and close the card“. And you may think you would have to repay the whole balance immediately, which you can’t afford to do.

But if you reject the increase and the account is closed, you carry on repaying the card as before at the old interest rate. You just can’t spend any more on the credit card.They can’t make you repay it all immediateley.

This doesn’t show as a payment arrangement or a default on your credit score. You are simplying choosing to stay on the old rate and are repaying the card as the T&Cs say.

Clearing the card when the interest rate is higher will take much longer and be more expensive. So if you are trying to clear the card, it’s usually sensible to reject the increase.

To reject the increase, you just need to phone, message or email the lender to say you want the card closed and you will carry on repaying it at the old rate.

2) Base rate changes

If you get a notice of a credit rate increase in 2025, this is NOT because of base rate change as the base rate is falling! So see the next section.

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.

The Bank of England base rate was increased several times by between 0.25% and 0.75% in 2022, and was increased again in January 2023 by 0.5%. Each of these changes is small, but they add up to a significant amount.

You don’t have the 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.

Very low interest rate?

Be careful if your interest rate looks very low – less than 3%.

Here you are probably looking at a monthly interest rate, not an annual one. There is a converter here you can use to change a monthly rate to an annual one.

This makes any increase look tiny, not worth bothering about.

So if your monthly rate is going up from 1.9% to 2.7% that may sound like less than 1%…  But it is actually an increase in the annual rate from 23% to 33%.

Already difficult 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:

• when your limit was set too high, so you have little hope of clearing the balance, read make a credit card affordability complaint which has a template you can use to complain;
• if this card is your only problem debt, 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 a creditor, talk to StepChange about a Debt Management Plan.

Payment arrangements and DMPs 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!

Card & catalogue affordability complaints

Could a Debt Relief order help you?