Borrowing over-rated

Banks hike card rate AND hit savers

GREEDY banks have upped credit card rates to a three-year high, while slashing what they pay savers to a record low.

Bank of England data out yesterday showed the average interest rate charged on credit cards edged up to 17.97% in April.

A number of popular cards charge even more.

The figure, the highest since February 2014, comes as credit card borrowing is rising at the fastest rate for 11 years. Consumers owe £68.1billion on credit cards, the Bank of England revealed.

Mike O’Connor, chief executive of debt charity StepChange, said: “Credit cards are designed to be a short-term product, but for many people they have become an expensive, long-term form of borrowing.”

Overdraft rates are also at a near alltime high of around 19.7%, despite the Bank’s base rate standing at just 0.25%.

The data confirmed that rates on cash ISAs dropped to a record low of 0.39% in April. The figure was down from 0.41% in March and half the 0.8% rate recorded in June last year.

The average instant-access rate was 0.15% in April, with a three-year fixed-rate bond at 1.19% – less than half the 2.7% rate of inflation.

The miserly returns are one reason fewer people are bothering to save. Separate data from the British Bankers’ Association showed the amount saved rose just 2.7% in April. That was despite April being a time when savers top up ISAs.

Meanwhile banks coin it in, with Lloyds Banking Group profits doubling to £1.3bn in the first three months, and Barclays making £944m from personal banking in the same period of 2017.