Average credit card interest rate jumps to 23.1%
Credit card purchase rates, cash per annum rates (the interest rate charged when you withdraw cash using a credit card) and cash withdrawal fees (the transaction charge for withdrawing cash) have also gone up.
This comes at a time when credit card borrowing has risen by £3bn year-on-year. Total credit card debt in the UK sits at £71.1bn, which translates to £2,613 per household on average – up from £68bn, or £2,521 per household a year earlier, statistics from The Money Charity show.
Bank of Scotland, Halifax, HSBC and Lloyds Bank all increased the interest rates charged on standard purchases and cash by 1%, while Tesco Bank increased its cash withdrawal fee by 0.99% on its entire credit card range.
“These increases might not seem small, but it’s worth noting that all these changes took place over the last three months alone, and included activity from some well-known brands,” said Rachel Springall, finance expert at Moneyfacts.
“It’s unsettling news at a time when consumers would not be expecting interest rates to rise, especially if credit cards are their lifeline.”
Worryingly, many consumers seem to be struggling to pay off their debt – £318m was written off by card providers in the first three months of the year. This means the company effectively sells the debt for accountancy purposes but the borrower is still obliged to pay the debt.
Springall said: “While credit cards are considered a common way to carry debts or switch them to an interest-free deal, this is only a temporary fix that simply buys a little more time to pay debts back. Without diligence, a growing debt could overwhelm customers and dent their chances of being approved for important financial milestones such as a mortgage. If in doubt, customers should seek out help, for instance a debt charity like StepChange, for vital support.”