Credit cards: interest rates hit a record high

https://www.theguardian.com/money/2019/sep/21/credit-cards-interest-rates-hit-a-record-high

Version 0 of 1.

Interest rates may have fallen to the point they have gone negative at some European banks, but that seemingly hasn’t stopped credit card providers shamelessly upping the interest they charge customers who don’t pay off their bill in full each month.

According to data website Moneyfacts, the average rate (APR) for those making credit card purchases hit an eye-watering 24.7% this month – the highest since the company started charting the figures back in 2006.

Within the past three months Tesco Bank pulled its Clubcard credit card, which at 5.9% was, it said, the lowest-rate card on the market.

During the same period, Bank of Scotland, Halifax and Lloyds Bank all increased the purchase rate on their cards.

MBNA also raised its rates, as did rival provider IHG Rewards Club.

Many consumers will consider the APR increases shocking given that the Bank of England voted this week to keep the base interest rate at 0.75%, while the US central bank cut interest rates there.

Earlier this month, a Guardian Money article asked whether the UK’s savings rates could be heading towards the zero mark. This told how some of Britain’s leading savings providers have been busy cutting their rates.

Rachel Springall, a finance expert at Moneyfacts, says the latest data from banking body UK Finance showed that 53% of cardholders are paying some interest on their credit card account at these inflated rates.

“Credit card customers should take every opportunity to pay more than the minimum repayment. A borrower who makes a purchase of £3,000 on a typical credit card, and repays £100 per month, will have the debt linger for over three years, and it will cost them £970 in interest,” she says.

“This alone, then, should reaffirm the importance of clearing the debt as fast as possible, or to switching the debt over to an interest-free deal.”