Credit card rates 'highest since 1998'
Tuesday, 16 February 2010 11:15
By myfinances.co.uk staff
Interest rates on credit cards have been driven to a 12-year high of 18.8% after the economic downturn made lenders increasingly wary of risk, a new report has claimed.
The research from Moneyfacts shows the last time the average rate was above its current level was in February 1998, when it stood at 21.1%. Back then, the Bank of England's base rate stood at 7.25 per cent, compared to a record low of 0.5 per cent now.
Increased competition at the end of the 1990s drove charges down, with the average rate hitting a low of 14.6% in 2006.
Michelle Slade of Moneyfacts said that rising unemployment since the start of the financial crisis has driven rates back up as providers became worried about the increased risk of customers defaulting on their debts.
"Borrowers with £5,000 debt on the 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," she added.
According to moneysupermarket.com, 28% of Britons use their credit card at least once a week.
Comments
Newsletter sign up