The rise in interest rates will see more Scots go bankrupt
DAILY RECORD - 24TH MAY 2007
The latest interest rate rise is bad news for everyone who owes money.
The Bank of England's quarter percentage point rate hike - taking its base lending rate to 5.5 per cent - was its fourth since last August.
It was the signal for all sorts of lenders to take action. Some lifted their charges right away, and over the coming weeks, many more will follow suit.
The cost of everything from credit cards to loans and overdrafts is going up.
So, if you don't want to get stung, it's time to see if you can save by moving your borrowing elsewhere.
For many people, the latest round of increases will be the last straw.
Some 3471 Scots went bankrupt between January and March - 12 per cent more than during the same period last year.
Andrew Kennedy, head of personal insolvency for the Scots arm of accountancy firm KPMG, warns: "As borrowing costs rise and stretch household budgets, even less money will be left to meet debt repayments.
"I fear the consequences will lead to thousands more Scots becoming insolvent."
Several lenders have already announced hikes, and in some cases they are far in advance of the bank's.
The new version of the Halifax One credit card has a typical long-term interest rate of 13.9 per cent, while its predecessor charged just 9.9 per cent.
This is a leap of more than 40 per cent - over eight times the bank's base rate rise.
The purchase interest rate on the GE Money Transformation card is up from 12.9 per cent to 15.9 per cent (a 23 per cent hike), while the cash withdrawal rate has gone from 16.9 per cent to 25.5 per cent (a 51 per cent rise). Nationwide has increased its loan rate from 6.7 per cent to 7.9 per cent, and HSBC's overdraft rate is up from 16.6 per cent to 18.3 per cent.
If you owe money on plastic - particularly store cards, where rates are typically between 25 and 30 per cent - or have costly loans, retail credit agreements or overdrafts, shop around now for cheaper deals.
It takes just a few minutes if you use independent price comparison websites such as Moneyfacts.co.uk, Moneysupermarket.com or Confused.com
But don't look on this as an opportunity to borrow more - you're trying to cut your debt burden, not make it worse.
If you're planning to switch a loan, check the small print of your existing deal for early redemption penalties.
If you're moving card balances, find out the transfer fee for your preferred new card.
You need to take these into account when you calculate whether it's worth switching.
Also be wary of deals advertising a "typical" rate. Only the borrowers with the best credit records get this, everyone else pays more.
So before you sign on the dotted line, make sure you know exactly what you will be charged.
Don't take the lender's card or loan insurance either - these policies are notoriously costly and difficult to claim on.
If you really want payment protection, go to a cheaper independent provider such as Paymentcare.co.uk or BritishInsurance.com.
