Credit cards Updated:
Unlucky for some – the average credit card rate has hit a 13 year high, research conducted by Moneyfacts.co.uk has found.
Starting from a peak of 21.1% in February 1998 – when interest rates were 7.25% - increased competition at the end of the 1990s saw rates begin to fall.
They reached their low-point in February 2006, when the average credit card rate fell to 14.8%.
Since then, however, the economic downturn has seen providers steadily increase their credit card rates, with the average rate for new customers hitting a 13 year high of 18.9% this month.
As economic conditions are still unstable, lenders are worried about the potential for customers to fall behind on their payments, and this increased risk has been passed on to credit card holders both old and new.
"Borrowers with £5,000 debt on their card, who repay the minimum each month, will now repay an additional £2,360 over the life of the debt compared to February 2006," said Michelle Slade, spokesperson for Moneyfacts.co.uk.
"During the financial crisis many card companies reassessed their existing customer base and many customers have seen large increases in the rates they are charged.
"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 selective over exactly who they accept for these deals.
"Since the beginning of 2011 most card companies have moved to a positive order of repayments. This dent in their revenue stream is likely to mean customers will continue to see rates rise rather than fall."
The best option available to those who want to sidestep these increases is the 0% balance transfer card.
For a fee, card holders can transfer their existing balances to the new card and escape paying any interest for a considerable length of time.
Moneyfacts.co.uk Best Buy - 0% balance transfer credit cards chart compares the best 0% balance transfer deals currently available, including cards from Virgin Money and Halifax.
Find the best credit card rates - Compare credit cards
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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