Interest rates near record low... credit card charges soar
‘Greedy’ firms blasted as needy suffer most
Interest rates increasing Bank of England’s base rate is still close to its record low The average annual percentage rate of interest on a credit card CREDIT card firms have been slammed as “greedy” after interest rates hit a new high.
Providers have been pushing up what they charge, despite the Bank of England’s base rate remaining at a near all-time low.
Experts said hard-up customers and those who are the least savvy are the most likely to be punished.
It comes at a bad time, with millions expected to turn to plastic to cover the cost of Christmas.
Research by data firm Moneyfacts found the average annual percentage rate on a credit card is now 24.7% – the highest for 13 years.
Yet the Bank of England’s base rate, used to influence borrowing costs, has stayed close to the record low it reached after the financial crisis 10 years ago – at just 0.75%.
Rachel Springall, of Moneyfacts, said a borrower with debt of £3,000 on a typical credit card, who repays £100 per month, could see it linger for more than three years and end up paying £970 in interest.
Lenders have removed some of the lowest charging rates.
Tesco Bank’s 5.9% Clubcard credit card has been pulled. And Bank of Scotland, Halifax and Lloyds Bank raised the purchase rate on their cards from 6.4% to 9.9%. MBNA’s Mastercard has risen from 19.9% to 20.9%
Ms Springhall said: “Consumers who turn to credit cards... will find the cost to borrow is starting to rise, as the most lucrative low-rate cards have worsened. Over the past quarter, we said goodbye to the lowest-rate purchase credit card on the market and have seen rates increase.”
James Daley, boss of consumer group Fairer Finance, said: “It is hitting the people who can’t pay off their balance, so can least afford the charges. [Card firms] are greedy and have got the business model wrong.”
UK households had £73billion worth of balances on credit cards at the end of May this year.
A spokesman for Lloyds Banking Group, which includes credit card brands Lloyds Bank, Bank of Scotland, Halifax and MBNA, said: “We regularly review our pricing across our credit card ranges, but continue to offer competitive options on purchase rates.” JAMES DALEY FAIRER FINANCE BOSS
It is hitting people who can’t pay off and can least afford the charges