Credit Card Interest Rates Continue to Increase Despite Base Rate Cuts

By: MoneyFacts

The average credit card purchase rate continues to increase, today standing at 18.1%, up from 16.3% two years ago.

Michelle Slade, analyst at Moneyfacts.co.uk commented:

“The increase comes from a combination of card providers raising rates, withdrawing competitive deals and the launch of new cards onto the market with higher APRs than we previously may have seen.

“In the last six month, twelve cards have increased rates including cards from American Express, Bank of Scotland, Capital One Bank, Halifax and Nationwide BS.

“Customers who repay just the minimum will be hardest hit with an additional £408 in interest now being payable on a modest balance of £2,000.

“With only a handful of cards on the market linked to tracking base rate, very few have seen any benefit from the current all time low base rate.

“Rising unemployment means that the risk of customers defaulting on their card repayments has increased, which is being passed on through higher rates. If customers are struggling with repayments, unsecured lending is one of first casualties as customers fight to keep hold of their property.

“Competitive credit card deals can still be found on the market, with 0% balance transfer deals available for 16 months and 0% introductory purchase deals for 12 months, but with the increased risk of default, only those with exemplary credit histories are likely to be accepted for the best deals.”

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