Debt Concerns Raised As Credit Card Rates Climb To 12-year High

Tue, 16 Feb 2010

Millions of credit card holders across the UK could face crippling debts following a huge rise in credit card interest rates, new research has revealed.

A study by personal finance website Moneyfacts.co.uk found that average interest rates on credit cards have risen to 18.8 per cent - the highest level since 1998 – despite the Bank of England’s base rate remaining at a record low 0.5 per cent for almost a year.

Over the last two years, the average APR charged on cards has risen by two per cent while the base rate has fallen from 5.5 per cent to just 0.5 per cent.

Figures from the Bank of England indicate that providers have pushed up rates because of a large jump in the number of borrowers defaulting on their credit card debts .

But Moneyfacts accused lenders of "sticking the knife in" at a time when many British households are already struggling to cope financially.

Michelle Slade of Moneyfacts said: "The UK continues to suffer from a high level of unemployment and providers are worried about the increased risk of customers not repaying their debts ."

"This increased risk continues to be passed on to both new and existing credit card customers through higher rates ."

She added: "Other charges such as balance transfers, cash withdrawals and foreign transfer fees also continue to go up, leaving customers paying more across the board."

The figures come after a survey by Moneysupermarket.com worryingly found that as many as 14 million UK adults rely on credit cards to pay for their everyday expenses, with one in five adults carrying three or more cards.
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