Shoppers who go into debt with Marks & Spencer this Christmas will be in for nasty surprise, after it massively hiked the rates on most of its financial products.
While M&S may argue it was forced to make these changes due to the credit crunch, we found that it has increased its lending rates up to three times more than its rivals.
In the last two months, personal loans, credit cards and store cards have all come “under review” at M&S, much to the detriment of its customers. Here’s what’s changed (and why you should avoid them).
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Personal loans
The effects of the credit crunch have been most clearly observed in the personal loan market, where rates have gone up across the board. But not all lenders have responded in the same vein.
Back in September, M&S offered its loans at a run-of-the-mill rate of 7.4%, or 1.1% higher than the best deals on offer at MoneyBack Bank and Your Personal Loan.
Fast forward to today and M&S loans now carry an eye-watering 8.9% APR, while both MoneyBack Bank and Your Personal Loan are available at 6.7%.
So while M&S increased its rates by 1.5%, the others increased by just 0.4%, meaning the gulf between them has doubled to 2.2%. In fact, the only lender to track M&S’ colossal rise over this period has been the crisis-struck Northern Rock.
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Credit cards, part one
Moving on to plastic and the news is bad for M&S borrowers on two fronts. Firstly, there is the balance transfer aspect.
The &More card originally offered a flat rate of 5.9% for the life of any debt, making it one of the best around for shoppers that wanted to pay less interest on debt but couldn’t be bothered constantly switching between interest-free deals.
But no longer; as not only has the rate increased to 7.9%, but it now expires after just two years as well (reverting to the typical APR thereafter). Unlike M&S, most of the other leading low rate deals haven’t changed at all. If you’re in the market for one, Barclaycard’s Simplicity is an attractive alternative, charging a 6.8% APR that actually lasts for the life of the debt.
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Credit cards, part two
The second problem relates to the aforementioned typical APR. Money education charity Credit Action says the average rate of interest on credit cards in the UK is 17.49%, so the &More card was already above average with its 17.9% APR.
This has now increased to 18.9%, making it one of the most expensive methods of spending around. It’s worth noting that new applicants will be charged no interest on shopping until end July 2008, equal to eight months free.
But if you’re in the market for a card with which to make new purchases, you can get up to 15 months interest free with the Halifax Purchase card – plus it reverts to a far lower 14.9% APR thereafter.
Get a card for new purchases here
Store cards
Store credit cards lure customers in by offering discounts on products purchased with that particular retailer. The problem is they charge exceptionally high rates of interest that more than cancel out those perks, and thus should be avoided at all costs.
The good news is that most retailers have held off from increasing the APRs on their in house cards this year. In fact only four - Burton, Dorothy Perkins, Argos and M&S Money- have made any substantial changes, increasing their cards by 2.7% on average.
Any guesses as to which one hiked their APR the most? That’s right, M&S. Its charge card had an APR of 18.9% at the start of the year, which is actually quite reasonable, but come October M&S had hiked the APR to a staggering 23.9%. Yet another product to avoid, then.
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This isn’t just credit, its M&S credit
As we mentioned briefly at the start, the credit crunch is definitely having an impact on the cost of borrowing. Most lenders have upped their rates in recent weeks, but M&S Money seems to be hiking its rates far more than anyone else.
What makes it more unforgivable is that it’s done so in the build up to Christmas - one of the most likely times you’ll need credit – plumping up profits at your expense.
It’s fitting M&S has chosen green for one its key logo colours, as this festive season its actions are definitely those of a Grinch.
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