According to a recent report credit card users in the UK have seen costs rising for the past two years, namely since the Office of Fair Trading placed a ceiling limit on penalty charges that credit card firms could charge for late or missed repayments and for exceeding the credit limit on the card. Credit card firms can now no longer charge any more than £12 per fee, which resulted in firms losing a lot of revenue, which they have since been desperately trying to recoup.

One official recently said: ‘In April 2006 the average purchase rate on a credit card was 14.9%; today this has jumped to 16.4%. Previously, whereas only a select number of customers were being penalised, now all borrowers are paying the price. For any customer who is paying their bill in full each month, the rate increase will have no impact, but with many households struggling with increasing financial pressures, those who only repay the minimum will be hardest hit. Anyone with a balance of £5,000 repaying just 2.5% per month will end up paying an additional £755 in interest from the 1.5% increase in purchase rates.’

She also stated: ‘The average interest rate for cash transactions have seen a marked increase from 18.1% to 24.3%. On top of this, the majority of institutions have increased cash advance charges. Previously the majority charged 2%, with a minimum of £2: now the majority charge 3%, with a minimum of £3.’

She added: ‘Taking cash out on credit cards has always been an expensive way of borrowing, particularly as interest is charged from day one. But with the 6.2 percentage-point increase in the average rate, customers who are relying on cash advances to balance their monthly budget will find a bad situation is now even worse.’

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