A major UK digital lender, Zopa Bank, has increased the representative APR on its credit cards from 9.9% to 26.6%, affecting both new applicants and some existing customers. This shift could add up to £167 in annual interest per £1,000 borrowed, placing additional financial pressure on cardholders already navigating a high-interest environment.
The decision has prompted concern from customers, with some reporting significant and unexpected jumps in their individual interest rates, while others have questioned the rationale behind such a steep adjustment.
The change reflects broader trends in consumer finance, where digital banks are increasingly recalibrating product terms in response to market conditions and credit risk assessments.
Representative APR Increase Impacts Borrowing Costs
According to reports, Zopa Bank has increased the lowest available annual percentage rate (APR) for new credit card applicants to 26.6%, a substantial jump from its previous 9.9% baseline.
The change affects the “representative APR,” a standard measure used in UK financial advertising, which must be offered to at least 51% of approved applicants. It also means some existing customers who had previously secured lower interest rates are now seeing their rates rise—sometimes without prior warning.
One user on a financial forum shared that their interest rate had increased by 10 percentage points, rising from 12% to 22%. Another reported a jump from 17% to 26.7%. Although not all users carry a balance and therefore avoid paying interest, those who do face a notable increase in borrowing costs.
For instance, a cardholder with a £1,000 balance would see annual interest charges rise by £167 under the new rate.
Zopa explained the move as part of a regular rate review process. A spokesperson stated: “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.”
Customers Offered Opt-Out but Face Account Closure
Zopa Bank confirmed that affected users receive at least 60 days’ notice when changes to their interest rate occur. Customers are given the option to opt out of the new rate. However, choosing this route leads to the closure of their credit card account once the existing balance has been fully repaid.
According to the bank, customers who opt out are allowed to repay their balances over time “at a reasonable pace,” without affecting their credit score or their relationship with other Zopa Bank products. The bank emphasised that this policy aims to support users who may be impacted by rate changes while maintaining compliance with regulatory standards.
This update aligns with a broader shift in the UK financial sector, where interest rates have risen following the Bank of England’s tightening measures.
