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Costs rise for credit card users
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Costs rise for credit card users
Friday, 05 Jun 2009 11:07
The average interest rate for credit card purchases is continuing to increase according to research out today.
Interest rates for credit card users now stand at around 18.1 per cent, up from 16.3 per cent two years ago.
The research from Moneyfacts.co.uk discovered the rises came from a mix of card providers raising rates, withdrawing competitive deals and the launch of new cards onto the market with higher APRs.
Michelle Slade, analyst at Moneyfacts.co.uk, said: "In the last six month, twelve cards have increased rates including cards from American Express, Bank of Scotland, Capital One Bank, Halifax and Nationwide BS.
"Customers who repay just the minimum will be hardest hit with an additional £408 in interest now being payable on a modest balance of £2,000.
"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."
According to Moneyfacts, the Halifax Easy Rate Mastercard, for example, will give customers 8.9 per cent APR, but a 25.95 per cent PA charge for cash withdrawals. In comparison, the APR for the Abbey credit card is 15.9 per cent, with PA at 27.9 per cent.
Other low rate credit cards, according to moneyfacts, include two credit cards from Barclaycard (Goldfish and Simplicity), as well as the Lloyds TSB and the Co-Operative with 11.9 and 12.9 per cent APR respectively. The Co-Operative is the only one of the six low rate credit cards listed by moneyfacts to have a 0% fee.
Ms Slade added: "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 first casualties as customers fight to keep hold of their property.
"Competitive credit card deals can still be found on the market, with 0% balance transfer deals available for 16 months and 0% introductory purchase deals for 12 months, but with the increased risk of default, only those with exemplary credit histories are likely to be accepted for the best deals."
