For info, not sure if anyone else might have received this...
I received notification today that Abbey were increasing the interest rate applicable to my credit card from the existing rate of 18.9% to
27.9% from March - a rise of over 47%I don't have a debt problem, although I suspect i'm not a particularly profitable customer for them - I have several £k on the card on a 0% transfer deal, and will be able to pay it off before they can sting me for any interest.
"Colin Wilson" wrote
Err - don't you mean a rise of (just) 9% ? ;-) [27.9% - 18.9% = 9.0%.]
Typical sensationalist headline... !
Anyway, even if you want to consider the *proportional* rise rather than the *absolute* rise, when looking at the monthly rates (which seems more reasonable to do for a credit card), it'll be more like 42.5% (not 47.5%).
That would be a rise of 9 percentage points, of course, which is quite different. Everyone should understand the concept of a 'percentage increase' and how it's calculated, and that it's inherently more meaningful than the thing you strangely assumed.
Matti
"Matti Lamprhey" wrote
Rubbish! When Japan put their rates up from 0% to (say) 0.25%, what was the percentage rise? Infinity?!!
"Matti Lamprhey" wrote
Hardly strange. I'd say the 47.5% figure is the much stranger one!
One special case when it doesn't apply, and you dismiss the whole concept? That says more about you than you'd like.
Matti
"Matti Lamprhey" wrote
It shows that the concept is unreasonable.
It's not just when you move from zero; any small value to a much bigger value will give silly results -- eg >100% if the rate more than doubles. Go from 2% to 5% -- what's the increase?
"Matti Lamprhey" wrote
Eh?
Nonsense -- it's all a matter of scale. If you're used to inflation remaining at around 2% for decades and then it shoots up to 5%, saying that this represents a 3% increase is highly misleading! It's more than doubled!
You're just arguing for the sake of it, of course, hence my earlier rude remark now snipped.
Matti
Nope, lets do the maths huh...
18.9 + 47.5% = 27.877518.9 + 42.5% = 26.932
I was closer, I win !
"Colin Wilson" wrote
No, try again -- didn't you notice I said " *monthly* rates " ?
18.9%pa = 1.45306%pm; 27.9%pa = 2.07182%pm. Even 2.07182 / 1.45306 - 1 is only 42.6% ..."Colin Wilson" wrote
Nope, you lose -- *twice* !!
"Matti Lamprhey" wrote
How can it be misleading? You know it used to be 2%, so if it goes up by 3% then that's more than doubled...
"Matti Lamprhey" wrote
Yep, that's because it's done up by more than 2%. Easy!
"Matti Lamprhey" wrote
Not at all -- I care passionately about the issue. I don't believe that people should sensationalise headlines by quoting "47.5% hike" when it's only gone up 9%; if they want to show the proportions, then say something like "nearly half again".
[...]>
The core of the problem, as I said in the first place, is that you are using "percentage change" for the concept which everyone else uses "percentage point change" to describe. If you insist on trying to confuse yourself and others then carry on, do. Otherwise it would be better if you would think about the distinction and try to apply it. You seem to be driven by this need to counter sensationalism -- in itself applaudable -- but you shouldn't do it at the expense of clarity.
Matti
-- saying no more on the subject
"Matti Lamprhey" wrote
The proverbial (unsophisticated) "man-in-the-street" is likely not to know the distinction, and might use "percentage change" for either. So the confusion arises just by stating "interest hike of 47.5%".
I think you'll find the APR relates to ANNUAL percentage rates - you're not factoring in the compound interest.
Talking about monthly rates is a misnomer here, I feel, as most people leave debt on the card for more than a month.
"Colin Wilson" wrote
Of course. So what? I was looking at the monthly rates.
"Colin Wilson" wrote
No, you're wrong, that's exactly what I *am* doing!
"Colin Wilson" wrote
Unless they leave debt on the card (at those high rates) for over a year, then the monthly rates are much more relevant. That especially applies if they leave the debt for a few months.
And I clearly stated the annual rates, which it appeared you ignored for the sake of an argument.
"Colin Wilson" wrote
I know. There ain't nothing special about a year (in this context). Why not look at 5 years instead? Then you could have quoted: "Newsflash - interest hike of over 76%" !!
Or even look at 10 years - "hike of over 130%" !
Obviously, it's fairest to remove the effect of compounding, which means you need to look at the monthly rates instead (no need to go as far as 'instantaneous' rates - "force of interest" - because CC cos only compound interest each month).
"Colin Wilson" wrote
Not at all. I'd be *much* happier if you simply admitted that I was right; then there'd be *no* argument!!
Sure, ok, in an out-of-context-and-misquoted way, you're right :-)
"Colin Wilson" wrote
You could sound a little more confident about it!
However, as I see that you can't refute my reasoning, I realise that your admission is actually more genuine than it at first appears. ;-)
Just keep telling yourself that :-)
"Colin Wilson" wrote
Further confirmation - thanks!
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