You are here: Home - Credit Cards & Loans - News -

Cost of credit card borrowing reaches fresh high

Written by:
The cost of borrowing money on a credit card has reached a fresh high, overtaking the December record, as more households are set to struggle financially in 2023.

The average purchase APR, including card fees, has risen to an all-time high of 30.4% APR, according to Moneyfacts which has collated the data since June 2006.

This has climbed from the previous record high of 30.3% in December 2022, up from 29.8% in November. Back in December 2020, the rate stood at an average 25.1%.

Meanwhile, the average purchase rate per annum has also reached another high of 24.7%, surpassing December’s figure of 24.6%. This is up from 23.9% in September 2022, and 22.6% in December two years ago.

Moneyfacts put the increases down to the effect of interest rate rises and the withdrawal of low rate cards.

However, it said that while borrowers may be concerned to see the average purchase APR surpass 30%, “it’s worth noting there remains a plentiful number of 0% introductory credit cards on the market”.

At current count, there are 72 options for borrowers (interest-free balance transfer deals) to choose from. This is unchanged from December, and means the number is up from 68 a year ago.

But, the average interest-free balance transfer term (the 0% window to pay off your debt interest-free) has dipped from 577 days in December to 564 days as of January 2023.

And Moneyfacts revealed the average balance transfer fee has also ticked up, from 2.16% last month to 2.2% now.

Elsewhere, there are 67 introductory interest-free purchase deals, up from 62 recorded in December 2021. But the average interest-free purchase days has also dropped slightly from 266 days in December to 259 today.

Less time to pay of debts before interest charged

Rachel Springall, finance expert at Moneyfacts, said: “The cost to borrow on credit cards has reached a record high, with both the average purchase APR (which includes card fees) and the average purchase per annum rate increasing.

“Borrowers may be concerned to see the average purchase APR surpass 30%, but it’s worth noting there remains a plentiful number of 0% introductory credit cards on the market. However, over the past few months, the interest-free terms on offer both for purchases and balance transfers have waned, so borrowers now have less time to pay off their debts before interest is charged.

“Those borrowers looking to take out a 0% introductory balance transfer card will be disappointed that the cost to move their debts is rising, with the average balance transfer fee also increasing to  the highest recorded since March 2021 when it was 2.23%.

“The average introductory interest-free balance transfer term of 564 days is at its lowest since December 2021, so despite these offers being typically sought after at this time of year, credit card providers have tightened the terms they are prepared to offer.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week