Cost of credit card spending spiralling

The cost of spending on credit cards – previously assumed to be immune to the credit crunch – has begun to spiral upwards, according to the latest research.

Findings from MoneyFacts.co.uk highlight 19 increases in the headline purchasing rates over the last three months alone, pushing the cost of borrowing ever higher.

Credit card companies usually tend to shy away from increasing the purchase rate, as this is the headline rate all consumers will look at when selecting a new card.

Some of the worst offenders include the Nectar Amex, which has seen the purchase rate increase from 15.9 to 18.9 per cent between the end of March and today, while the Capital One Platinum MasterCard has seen a similar increase.

As a result, a consumer who had £3,000 on the card and repaid just the minimum would now have to pay an additional £1,073 more than they would have before.

"Some of the recent changes could perhaps be justified by lenders’ increased risk and cost control as a result of the credit crunch," said Michelle Slade, analyst at MoneyFacts.co.uk.

"Others, such as reducing the minimum repayment, could just be seen as squeezing more profit from those who are already feeling the pinch."

Furthermore, some 14 increases have also been recorded in cash rates.

While Ulster Bank charged interest of 19.285 per cent for cash withdrawals on its Gold MasterCard/Visa in March, this has now risen to 24.942 per cent – an increase of 5.657 per cent.

Even more shockingly, the Debenhams MasterCard has seen rates increase 7.047 per cent, from 22.9 per cent to 29.947 per cent over the same period.

MoneyFacts has also recorded a further eight cash withdrawal fee increases, five increased balance transfer fees and three increases to foreign usage charges.

A further two cards have reduced minimum repayments, and one has increase account fees.

"Until recently the credit card market had seemed to continue along as it always has," added Mr Slade.

"Lenders extended introductory deal dates as they always have, some lenders amended their rates, while others increased charges."

Chris O'Toole