Interest rates in the UK have been cut three times since December of last year, with the base rate falling to 5% from 5.75%. Since April the base rate has been held at 5%. However, whilst the base rate is now the same as it was in 2006 following the recent cuts, industry officials are concerned that credit card interest rates and charges are still spiralling, putting many cardholders at risk of getting into increased debt.

One industry official, Michelle Slade, stated: “With increasing costs on all household bills, many people are relying on their credit card to get by each month. But these people are going to find themselves out of pocket as purchase and cash rates, along with charges, continue to increase. Since the beginning of the year there have been numerous increases to rates and charges, with some cash rates being increased by over 7% and purchase rates by as much as 3%.”

She continued: “The number of increases to purchase APRs is quite phenomenal. Normally credit card providers avoid such increases as these are the rates customers see first. It goes to show just how tough credit conditions have become for the institutions and this is being passed onto consumers. For example anyone with £5,000 of purchases on the Nectar Credit Card AMEX repaying the minimum 2.5%, min £5, the 3% increase will find themselves paying an additional £1,823.75 in interest over the life of the debt.”

Slade added that it was important to look for the right card in order to keep costs down. She said: “The first thing to do when looking for a new credit card is to look at how you will use the card. If you have an existing debt on a card, it may be worth considering a 0% balance transfer deal. Currently balance transfers best buys are topped by Virgin Money’s MasterCard which offers 0% for 15 months. Alternatively, if you are looking to make some new purchases, you may wish to consider a 0% introductory purchase deal. HSBC’s Bank Credit Card MasterCard is currently offering 0% for 12 months. Anyone looking for a low rate card will find Barclaycards Simplicity Visa at 6.8% an attractive deal.”

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