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.”

New high for credit card interest rates is a post from: Credit Cards Web

For those that do not yet have an affordable credit card for their Christmas shopping it is vital to start the search, as it could take some time to find and receive you r card, and of course you also have to consider that you may not be successful in getting a card in the current climate so you need to give yourself time to consider other options.

It is, of course, vital that you don’t rush into taking out just any old credit card otherwise you could end up paying far more than you need to or you could end up with a totally unsuitable credit card that offers little in the way of perks or value for money. It is therefore important to allow yourself time to go through the different credit card deals and providers as thoroughly as possible.

Before you start searching for credit cards you need to determine what you want from your credit card, and this will depend largely on how you intend to use the card and repay the balance. If, for example, you want to use the card for the Christmas period for convenience and flexibility and you plan to repay your balance in full within the interest free period you won’t have to worry about looking at the interest rates charged on the cards because you won’t be paying any interest. Instead, you can look at what the cards offer in terms of perks, such as cash back, rewards, vouchers, and other perks. This way you get something back for using the card over the festive season and you won’t have to pay any interest.

On the other hand you may be the type of person that wants to be able to make all of their purchases over Christmas on the credit card but then wants to spread the balance. In this case you will need to look at the interest rates charged on the cards, and more importantly see if you can find a great deal on an interest free credit card. With the right 0% purchase credit card you can spread the repayments on your balance over a generous period, such as twelve months, and as long as you clear your balance within this period you won’t have to pay a penny in interest.

The credit card market has started to become more competitive following a turbulent couple of years, and this has resulted in a greater number of lenders now offering tempting perks and interest free deals. Those that have a good credit history should now find a decent choice of suitable credit cards on the market, although those with damaged credit may still find that their choices as somewhat limited.

The best option to try and find the most suitable and affordable credit card in plenty of time for Christmas is to go online, as this will provide you with the benefits of speed and convenience, as well as plenty of choice. You will often get an instant decision on your credit card application when you use the Internet, which will help to speed things up somewhat.

By going online to find your credit card you can browse and compare deals from the comfort of your own home, and you can also benefit from various tools and resources, such as credit card comparison sites, which will allow you to compare a wide range of cards at a glance.

Consumers should start hunt for credit card for Christmas is a post from: Credit Cards Web

The official, from the consumer group Which?, said that in some cases lenders are charging higher interest rates to their credit card customers simply to recoup losses that they are making in other areas, such as loans, mortgages, and even current accounts.

The official, Martyn Saville, said that consumers who are charged crippling rates on interest on their credit cards should not simply accept them without question but should challenge the high rates that are being applied to their accounts.

He said that it was important for consumers to challenge overly high rates of interest because, with the base interest rate at its lowest level of over three hundred years, at just 0.5 percent, card providers simply could not justify the rates that they were charging to some credit card holders.

Mr Saville said: “There is an element of the effect of the credit crunch still carrying on because it’s expensive for them [lenders] to borrow, but the rate at which they lend to each other has come down in the last six months.”

He also predicted that in the future credit card rates would have to start coming back down again, as credit card providers would have to be more competitive in order to hang on to business, and those refusing to lower their rates would lost borrowers to more competitive rivals offering more reasonable rates of interest.

Recent research has shown that compared to two years ago, when the base interest rate was over 5 percent, the average credit card interest rate has gone up by nearly 2 percent.

Average rates have now smashed through the 18 percent barrier, even though the base interest rate is at just a tenth of the level that it was two years ago.

Rates on credit cards should be challenged is a post from: Credit Cards Web

So what are the measures being employed against unscrupulous lenders? Amongst the wide-ranging reforms are:

Ban on negative hierarchy

There will be a consult on a ban on negative payment hierarchies. This is when payments on a card go towards paying off the cheapest debt first, keeping cardholders paying the maximum amount of interest for the life of their balance.

A horrible trick employed by almost every credit card issuer except Nationwide building society, who estimate that it costs cardholders around £500million every year in EXTRA interest. It’s a practise which has come up for fierce criticism over the last few years, and it seems the Government has finally listened.

Ban on unsolicited credit card cheques

Lenders will no longer be able to send out credit card cheques when they are not requested. Credit card cheques work like personal cheques and seem like ‘easy credit’, with the amount being added to the card balance. But with high interest (no interest-free period) and a handling fee of around 2%, they are an expensive option and often take advantage of those who can afford it least.

Ban on unsolicited credit increases

There will be a consult on a ban on unsolicited credit limit increases. This is a big one which preys on the vulnerable and people going through desperate times.

Companies will no longer be able to increase credit limits without a specific request from the customer so the temptation of unused credit at one’s fingertips will be removed and consumers will have to apply for more credit- meaning more rational thought would be applied by the customer with regards to budgeting and affordability- and cheaper options. A survey shows that in the past year, one in five people have had their credit limit increased without their consent.

Curbs on loans with extortionate interest rates

This includes doorstep and much maligned ‘payday’ loans. Rates on these loans can reach a staggering 1800% APR! Again, they are aimed at the more vulnerable who can least afford it. Some payday loans don’t even require a credit check.

Unsecured borrowing in the UK has soared during the past decade, with consumers collectively owing more than £230 billion on credit and store cards, overdrafts and loans. Today, we Brits have a unbelievable £232.7 billion of non-mortgage debt, spread across overdrafts, car and personal loans, and store and credit cards. That comes to over £9,300 for each of the UK’s 25 million households

So these measures may be a case of ‘better late than never’ but should these measures all be imposed, the increased protection to consumers will improve the lives of tens of millions of borrowers, especially the most vulnerable.

So, the catch? When these proposals become law, credit card issuers will find their income dramatically reduced, meaning they will be forced to cut costs and seek out new revenue streams. It may mean the death of the 0% balance transfer.

More Protection For Credit Card Borrowers But With A Catch is a post from: Credit Cards Web

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.”

Average credit card rates shoot up once again is a post from: Credit Cards Web

One major credit card provider, Barclaycard, has recently announced that it is cutting the interest rates on credit cards for some of its lower risk customers. The credit card giant has been under pressure from authorities to do more to help struggling consumers in the current financial climate.

The report suggests that around three million of the lowest risk Barclaycard customers could see the interest rates on their credit cards fall between 2.5 and 5 percent. However, despite this move from Barclaycard, some industry officials are angry that the card provider, along with other credit card giants, have taken far too long to react to the series of interest rate cuts over the past five months, leaving their customers struggling for far longer than they should have been.

With the base interest rate now down to just 1 percent the average rate of interest charged on a credit card is now around ten times the level of the base interest rate. Barclaycard has said that although three million customers are likely to benefit from the rate cuts, another nine million or so will not benefit, because the current financial climate has increased their risk of defaulting on repayments, thus turning them into high risk borrowers.

Over recent months credit card firms have been targeted by the government and following a series of meeting have agreed to a set of new measures to help ease problems for struggling borrowers, such as allowing them more breathing space before calling in debt collectors, and ensuring that adequate written notice is given of changes in their interest rates.

Barclays cuts rates for some credit card customers is a post from: Credit Cards Web

In the past this was not too much of a problem, as many consumers were able to switch any remaining balance onto another 0% balance transfer credit card, which means that they could enjoy a further period of interest free credit. However, over the past year credit conditions have become far tighter, and many of those that may easily have been able to get another 0% card in the past will now find that they are no longer able to get their hands on another card.

Some officials have worked out that between April and November of last year around five million consumers transferred balances from high interest credit cards onto 0% balance transfer cards, and with many of these balance transfer cards offering an interest free period of around twelve months many are due to come to an end. Also, the average rate of interest charged on credit cards has gone up during this time, so when interest does start being charged it may be at a higher rate than it would have been previously.

Industry experts have added that the number of 0% balance transfer credit cards on the market has risen over the course of the year, but that availability of these cards remained strained because of the effects of the global credit crunch.

Credit card increases could become reality for many is a post from: Credit Cards Web

In fact, many consumers would not be blamed for feeling ripped off by credit card firms, according to some industry officials, as many have been hit with increased interest rates, added annual fees, and soaring fees and charges, often with no explanation and very little notice. With the global credit crunch already causing problems, and many households facing financial problems due to rising energy bills, high food costs, rocketing petrol prices, and soaring living costs, these credit card rate and fee hikes can make all the difference.

Officials from fool.co.uk recently commented on the situation with credit cards, and on official said that the rates on credit cards remained very high even though the Bank of England had reduced the base rate three times since December.

He said: “The Bank of England has trimmed interest rates three times since December 2007. But, despite the cuts, interest charges on outstanding credit card balances remain disgustingly high.” He continued: “The typical annual percentage rate on popular credit cards is around 16 per cent, which is over three times higher than the Bank of England base rate. This means we are forking out £7.7 billion in annual interest payments – around £250 for every credit card holder a year.”

Another official said: “Most of us would normally seek out a new zero per cent deal to tide us over the bad times, but with lenders playing a cautious game, getting one of those cards is more difficult than it used to be. This means more of us will have to use our current credit card and if the 0 percent deal has expired, you’ll be borrowing money at a rate of around 16 percent; be careful what you spend on the plastic because the interest will soon mount up.”

Fool.co.uk has also urged consumers to contact their credit card provider if they are unhappy with a sudden rate rise and challenge them over the rate. In many cases consumers with a long standing history with the provider and a good repayment history can often get the rate reverted back to its original levels.

The official went on to state: “APRs are not set in stone, and are open to negotiations. Every one per cent reduction in APRs represents an extra £74 million that go into consumers’ pockets to ease the credit crunch. It is a fraction of the £50 billion bailout that lenders are grabbing from the Central Bank, which is, after all, our money. Fool.co.uk therefore urges card holders to ask their providers for a reduction in interest rates. Banks may want their cake and eat it, but we deserve a slice too, since we are paying for it.”

Should credit card customers ask for a rate cut? is a post from: Credit Cards Web

One industry official stated: “As prices continue to rise, many more consumers are seeing their credit card bills increase. Even if you are not one of the people who is having to use your credit card just to get by each month, the likelihood is that you have been hit by an increase of some sort from your card provider.”

Another said: “I’d strongly advise those with an outstanding balance to move to the longest term 0% balance transfer available, currently Capital One, followed by Virgin, to keep your interest down. If you are thinking of paying off over a longer term, look for a low rate for life or a low standard rate credit card.”

Recent research has shown that there are now around seventy two credit cards that charge 17.9% or more in interest, and officials have said that there are better deals to be had out there for those that take the time look and apply. Cardholders looking to make purchases on their cards could save money by switching to a more competitively priced card, and those with existing balances on high interest credit cards could benefit from a competitive 0% balance transfer deal.

Cardholder can do something about rate hikes is a post from: Credit Cards Web

In the last six months industry officials claim that the interest rates charged on many credit cards has jumped to 17.4%, which is an average increase of 0.6% over this period.

Over seventy two credit cards are thought to now be charging interest rates of 17.9% or higher, with some cards, namely for those with damaged credit, charging an astonishing 40% or more in interest. With just fifty nine credit cards charging 17.9% or more six months ago officials have noted how rapidly card providers have been increasing their rates.

One industry official stated: ‘Homeowners have been the most visible losers in the credit crunch but credit card customers are also sharing the pain. Average rates of 16.8% were bad enough in February but despite two Bank of England rate cuts, which reduced borrowing costs by half a point, credit card average rates have increased by 0.6 of a point.’

He added: ‘Mortgage customers might complain about rates of 6 or 7% but for credit card customers the charges are much higher. And with some cards charging more than 40% it really seems like the sky is the limit.’

Credit Card Firms Keep Pushing Up Interest rates is a post from: Credit Cards Web