When money’s tight, a credit card can prove useful to help balance the books. But what happens if you don’t get the rate you wanted? Or worse still, what if you’re refused altogether?
There are plenty of adverts for credit cards with decent rates, but there’s no guarantee you’ll benefit from any of the attractive rates on offer.
But why is that? Well, in 2011, new rules came into effect (European Consumer Credit Directive) which said that credit card companies only need to offer 51% of successful applicants their advertised annual percentage rate (APR). This was down from the previous minimum of two-thirds of applicants.
The change allowed credit card companies to offer more of their customers a higher interest rate than the one advertised.
Getting left in the dark
One Which? member experienced this problem recently. They said:
‘I’m 68 and recently applied for a 0% balance transfer credit card with Halifax. The advertised rate was initially 18%, but I was offered 24%. I challenged this and Halifax advised me to get a credit rating.
‘I was amazed to find I was penalised for my age, despite having sufficient income to pay the monthly instalments. Is this common practice or was I just unlucky?’
Lenders assess each credit card application on an individual basis, taking a wide-range of information into account. Their assessment is largely based on a borrower’s ability to repay. This then affects the rate offered – if an offer is made at all.
One size fits all
When a credit card application is rejected, customers are often left in the dark by the provider as to the reason why. Often, they’re simply told to check their credit file, without being told which factors had negatively affected their application.
Would it be too difficult for lenders to explain to applicants why they were refused, and provide them with practical action points? Simply being told to ‘check your credit file’ doesn’t seem particularly helpful.
Have you ever been refused a credit card? Were you given a reasonable explanation? If the rate offered was higher than the advertised rate, did you accept it, or go elsewhere?