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"Average credit card rates shoot up once again"

By admin | June 20th, 2009 | Credit Cards

Over the past seven months the Bank of England base rate has declined to its lowest level in the three hundred and fifteen year history of the central bank, sinking to an all time low of just 0.5 percent, which is just a tenth of the level it was at in October of last year, when the aggressive interest rate cuts started to come into play. However, the credit card industry seems to be distancing itself from base rate movement, with recent figures showing that once again the average credit card rate has soared.

It has been revealed in a recent report that the average rate of interest charged on credit cards has now increased to just over 18 percent, so whilst the base interest rate has been coming down the average credit card interest rate seems to have been rising.

For millions of credit card users this is causing a huge financial headache, especially in the current financial climate, as it means that borrowers are having to pay more in interest unless they clear their balance in full every month.

Industry officials have claimed that one of the reasons that credit card firms have increase the average rate of interest again is because the risk of higher levels of defaults has been increased because of the recession and rising unemployment levels. The credit card companies are covering themselves against an increase in losses by passing higher charges and rates on to customers.

One industry official said: “Rising unemployment means that the risk of customers defaulting on their card repayments has increased, which is being passed on through higher rates. If customers are struggling with repayments, unsecured lending is one of the first casualties as customers fight to keep hold of their property. With only a handful of cards on the market linked to tracking base rate, very few have seen any benefit from the current all time low base rate.”

Tags: base rate, credit card rates, interest rates

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