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Credit card rates soar

Credit card rates soar

Category: Credit cards

Updated: 05/05/2011
First Published: 05/05/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Credit card rates have rocketed in the first months of this year, with increases of up to 2.0%, research from Moneyfacts.co.uk has revealed.

Since the start of 2011, some 18 credit cards have had their rates increased, compared with just four in the same period in 2010.

Several of the high street's most recognisable names have been party to the increases, including Barclaycard, Halifax, Royal Bank of Scotland and Santander, and consumers have been warned to expect more of the same.

"It is unlikely we have seen the last of the increases and Moneyfacts expects more providers to follow suit," commented Michelle Slade.

These latest increases mean that the average interest rate charged on credit cards now stands at 19.1%, the highest level in 13 years.

The hikes may have been driven by a couple of rule changes that have squeezed providers' revenue streams.

At the beginning of the year, card providers were forced to move to a different system, whereby repayments are used to pay off most expensive debts first, thereby denting the revenue levels they can earn.

They have also been hit by the PPI ruling which could force providers to pay back billions to compensate customers that were mis-sold policies.

But by contrast to rising rates, at the other end of the market customers are now being offered the longest ever 0% balance transfer and introductory purchase deals ever seen.

"Providers hope to bank on customers' reluctance to keep switching and can claw back the lost interest during intro periods once they end," added Ms Slade.

"In an ideal world customers should look to repay their balance in full each month; that way no interest is payable."

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