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 per cent 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 all-time high of around 19.7 per cent, despite the Bank’s base rate standing at just 0.25 per cent.

The data confirmed that rates on cash ISAs dropped to a record low of 0.39 per cent in April. That’s half the 0.8 per cent rate recorded in June last year.

The average instant-access rate was 0.15 per cent in April, with a three-year fixed-rate bond at 1.19 per cent – less than half the 2.7 per cent rate of inflation. The miserly returns are one reason fewer people are saving. Separate data from the British Bankers’ Association showed the amount saved rose just 2.7 per ent in April. That was despite April being a time when savers top up ISAs.

Meanwhile, Lloyds profits doubled to £1.3billion in the first three months, and Barclays made £944million from personal banking in the same period.