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04/04/08

10,000% interest on a balance of 1p

Citibank has announced it is to raise its minimum interest charge on its credit cards from 50p to £1 from May for its 900,000 UK customers.

The move is a further indication that credit card firms are tightening their lending criteria and raising rates in the wake of the the credit crunch.

This means that customers who leave just 1p on their credit card would be charged £1 - effectively a 10,000% interest rate.

Barclaycard already levy a £1 minimum charge, while most credit card providers, including Halifax, Bank of Scotland and Egg, impose a minimum 50p charge for customers who pay interest on their bills. If you have a small outstanding balance after making a payment the interest will be “topped up” to the minimum charge. Some, like RBS, which covers Natwest do not charge the fee.

A spokesman for Citibank said the increase in the minimum interest charge would effect less than 1% of its UK customers. Furthermore, you would need a balance of less than £70 to trigger the minimum interest fee.