By Elliot Wright, 16th February 2010
Credit card interest rates have crept up to their highest level
for 12 years, according to research by Moneyfacts.
The personal finance information service said that the average
credit card interest rate has risen to 18.8%, despite the 0.5% main
Bank rate not budging for months.
High levels of unemployment coupled with the increasing risk of
customers not repaying their debts are said to be at fault for the
high interest rates being passed onto both new and existing credit
card customers.
Borrowers with a £5,000 debt on their card, who just repay the
minimum each month, will now repay an additional £2,289 over the
life of the debt than they would have in February 2006 - when the
average interest rate stood at 14.5%.
As well as interest rates going up, Moneyfacts also say that
other charges such as balance transfer, cash withdrawal and foreign
transfer fees are also continuing to rise, leaving customers paying
more across the board.
Michelle Slade, spokesperson for Moneyfacts, said: ""Card
companies are reassessing their existing customer base, resulting
in numerous customers seeing a rise in their rate.
"Many such customers who would previously have switched to
another provider are now finding it's not so easy to do so.
"Competitive deals for balance transfers and introductory
purchases remain on offer, but card providers are being extremely
selective over exactly who they accept for these deals.
"If customers do receive notice of a rate increase, they should
challenge their provider as to why the increase is necessary,
especially if their credit status hasn't changed."
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