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"Credit card borrowing much higher than in 2006"

By admin | August 25th, 2008 | Credit Cards

Over the past few years the interest rate has been fluctuating a lot, with five interest rate hikes of 0.25% each between August 2006 and July 2007, and then three interest rate cuts of 0.25% each between December 2007 and April of this year. However, in a recent report industry officials pointed out that the interest rate at present stands at the same level as it was during the same period in 2006, yet the cost of borrowing on credit cards is far higher than it was at this time in 2006, reflecting a significant imbalance in the base rate and borrowing costs.

One industry official said: “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%.”

Another said that new credit card customers were most likely to get the best deals providing they had a good credit rating, stating: “It remains the case that the industry offers its best deals to new customers. For the creditworthy, there is still a clear incentive to change your credit card every year or so.”

One industry expert said that credit card costs had rocketed over the past couple of years. He said: “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.”

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