A credit card provider that introduced its credit card in 2020 is hiking its interest rates. Used by over half a million customers, Zopa Bank is a digital challenger bank and is hiking interest rates. When the bank initially introduced the credit card in 2020, it proved to be extremely attractive to applicants, with advertised interest rates as low as 9.9 per cent annual percentage rate (APR).
APR is the yearly cost of borrowing on a credit card, including fees and interest. While the credit card advertised a 34.9 per cent representative APR (something they had to legally offer to at least 51 per cent of the applicants), several customers with good credit scores benefited—as they initially received the lower APR rate of 9.9 per cent.
Now, The Sun reports that Zopa Bank has increased its lowest available APR to 26.6 per cent from its initial 9.9 per cent for new customers. The digital bank is also on the path to raising interest rates for some of its existing customers—those who were previously benefiting from rates lower than the new 26.6 per cent threshold.
Some customers have vented their frustrations online. On an online money forum, one person said: “Just a heads up if you have a Zopa CC, Zopa have hiked my interest rate up 10 points today 12% to 22% – completely out of the blue.”
They added: I only use it for big purchases and rarely ever go over 25% of its limit – usually always paid off within 3 months. I can’t understand why they are doing this, it’s puzzling (other than greed). I’ll just pay off what I owe before the new rate kicks in and ditch it.”
Another customer said: “Mine up from 17% to 26.7% – closed as I didn’t really need it although it was my lowest APR card, it no longer is. Not that I carry a balance – except a 0% balance transfer.”
Credit card companies frequently adjust their interest rates for a variety of reasons, such as changes in the market or a reassessment of customer risk. These rate changes can be applied to individual accounts or across many.
If your credit card APR increases from 9.9 per cent to 26.6 per cent, you’d end up paying £167 more in interest per £1,000 borrowed over a year. That’s because at 9.9 per cent, you’d pay £99 in interest annually, whereas at 26.6 per cent, it jumps to £266. If you always pay off your balance in full each month, these changes won’t affect you at all, as no interest is charged.
As per The Sun, a spokesperson for Zopa said: “We regularly review our credit card interest rates to ensure they provide fair value to our customers. As part of this process, customers’ rates may increase or decrease, as is the case now. When a customer’s rate changes, we provide at least 60 days’ notice.
“Customers have the choice to opt out from this. If they do, their interest rate will stay the same and their credit card account will be closed once the balance is fully repaid. We don’t impose a strict repayment deadline, allowing customers to pay off their balance at a reasonable pace with no impact on their credit file or any other Zopa Bank products.”
If you’re unable to pay more than the minimum balance but want to avoid accumulating interest, transferring your debt to a balance transfer credit card may be a practical option. Balance transfer credit cards are an effective tool for individuals working to repay existing debt. They typically offer an interest-free period on transferred balances, allowing more of your payments to go toward reducing the debt itself.
