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Hey, I鈥檓 Priscilla, 海角社区鈥檚 Head of Finance. In light of changing Bank of England rates, we鈥檝e made the decision this week to raise our interest rates. I wanted to share some more information about why we鈥檙e doing this now.
This is the first time we鈥檝e raised our rates since our launch to market. We did our best to absorb the previous Bank of England increases this year to keep our rates as low as possible for as long as possible. Though we don't need to rely on interest revenue to be sustainable, the latest increase means that we now need to change our rates.
If you pay off your bill in full before the due date each month, you don鈥檛 get charged interest. So this change may not impact you at all. However if you do want to borrow, we want to be transparent about how the rate change might impact you. We鈥檒l always be crystal clear about how much interest you are paying and we believe in interest payments that make life more affordable and accessible.
Why did we only just recently increase it?
Raising interest rates was something that we have thought carefully about before deciding to make the change.
When we issue credit to you, we borrow money from our credit partner. The rate that we borrow at is tied to the Bank of England rates. Each time their rates go up, the cost to issue that credit to you goes up too.
We鈥檝e been trying to absorb it for as long as possible but given our cost of funding has gone up by 3% since the start of the year; in order to keep providing you with the best reward product offering in a sustainable way, we鈥檝e had to pass on some of these costs. We鈥檒l do our best to reduce this rate once the Bank of England rates go down as well.
How did we arrive on 27.71%?
We use the Simple Rate to work out how much interest you鈥檒l be charged each month. This rate moves in line with the Bank of England Base Rate.
When we originally set the Simple Rate, the Bank of England Base Rate was 0.1%.
The Bank of England rates have since risen to 3.5% in the last 12 months; we have absorbed 0.4% of it, and have passed on 3%.
This increased the Simple Rate from 21.47% to 24.47%, and has the flow on effect of increasing the Purchase rate (compounding rate) from 23.94% to 27.71%.
Here鈥檚 an illustration of the increase in interest rates:
Assuming you spend either 拢100 or 拢500 on your card in January, you'll get a bill for your January spend (of either 拢100 or 拢500) on February 1st. If you don鈥檛 pay your bill in full before the due date of February 15th, the table below shows how much you would pay interest on either 拢100 or 拢500 and how that will change with the new rates. Remember, to minimise the impact of the increase in interest rates, you can pay off your balance in full each month and you won鈥檛 be charged any interest.
If you鈥檙e having trouble making your payments, let us know right away
If at any time you're worried about your repayments, just get in touch with us in the app and we can help. We want to help you as much as we can, but we can only do that once you let us know that your circumstances have changed. We can support you by helping to set you up on a payment plan.
