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"New high for credit card interest rates"

By admin | March 3rd, 2010 | Credit Cards

Recently released figures have shown that credit card interest rates in the UK have reached a new high, despite the fact that the base interest rate in the UK has remained at a record low of just 0.5 percent since March of last year.

Research by a finance industry group has shown that credit card interest rates are now at their highest level in twelve years, which is bad news for the many people that are still struggling with their finances as a result of the recession and the credit crunch.

Officials from Moneyfacts claim that over the course of this year so far credit card interest rates have increased to 18.8 percent, making the gap between the base interest rate and the average credit card interest rate astonishing.

Lenders are thought to have increased the interest rate charged on credit cards because they believe that in the current financial climate a rising number of borrowers are likely to default on their repayments, and the higher interest rates help them to cover the risk that they are taking in providing credit.

Data from the Bank of England showed that banks have been writing off huge amounts of money as a result of credit card defaults, which gives some back up to the providers’ claims that they are increasing rates to try and recoup some of the losses that have stemmed from defaults. The Bank of England has also acknowledged that credit card rates have increased, although its data indicates that rates are now at their highest in three years.

A spokesperson from Moneyfacts said: “The UK continues to suffer from a high level of unemployment and providers are worried about the increased risk of customers not repaying their debts. This increased risk continues to be passed on to both new and existing credit card customers through higher rates.”

Tags: credit history, Credit Cards, interest, interest rates, Moneyfacts

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