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"Credit card rates soaring"

By admin | June 30th, 2009 | Credit Cards

It has been shown in a recent report how credit card interest rates in the UK are soaring, with the APR on some cards having now broken through the 18 percent barrier.

This has caused outrage amongst consumers and campaigners, who are demanding to know why credit card rates are soaring whilst the base interest rate has plummeted to its lowest level in history at just 0.5 percent.

It appears that credit card companies are taking little notice of movement in base rate when setting their interest rates, and whilst the base interest rate has fallen dramatically since October of last year credit card rates have continued to rise despite the fact that credit card companies pledged to make things fairer for customers earlier this year.

Many cardholders will have to pay a fortune in interest based on these rates, which is particularly difficult in the current financial climate.

It has been suggested that amongst the reasons for credit card firms increasing their rates by this level are increasing default levels, which is resulted in huge financial losses for credit card providers.

Some industry experts have said that increasing the rates charged to customers is one way of credit card providers recouping the losses that have stemmed from this increase in default levels, but at the same time higher rates could further reduce affordability for consumers leading to an even higher level of defaults.

One industry expert stated: “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: credit card rates, Credit Cards

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