Barclaycard to cut base rate link

Barclaycard is telling some of its customers that their cards will no longer track the bank rate, paving the way for potential future increases

Barclaycard is telling some of its customers that their cards will no longer track the bank rate, paving the way for potential future increases.

The credit card issuer, which has 10 million customers, said that the link with the Bank of England base rate, which is likely to remain at its record 0.5% low for some time, will be severed.

Cardholders with rates that track the base rate will be put on "variable interest rates" from September in a move which has emerged just days after forward guidance from the bank, under new governor Mark Carney, appeared to push back market expectations that rates could start rising as soon as next year.

Barclaycard's letters say the changes come at a time when the Bank of England’s base rate is at an "all-time low". Credit card rates have been edging up in recent months and reached a 19.1% in April, according to financial information website Moneyfacts, which started tracking APR (annual percentage rate) figures in 2007. They have slipped back slightly since to average 18.9%.

Spokeswoman Rachel Springall said changes could spell higher rates of interest for borrowers. She said that Sainsbury's Cashback Low Rate MasterCard currently charges a market-leading low purchase rate of 7.8% APR.

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