Credit card rates continue to rise

The cost of using a credit card is increasing as more Brits turn to plastic to make ends meet.

Since the beginning of the year there have been 22 purchase rate hikes, 15 cash rate increases and over 30 fee increases for services such as balance transfers, cash withdrawals and foreign usage.

Michelle Slade, analyst at Moneyfacts.co.uk, said: "The number of increases to purchase APRs is quite phenomenal. Normally credit card providers avoid such increases as these are the rates customers see first.

"It goes to show just how tough credit conditions have become for the institutions and this is being passed onto consumers.

"For example anyone with £5,000 of purchases on the Nectar Credit Card AMEX repaying the minimum 2.5 per cent, min £5, the three per cent increase will find themselves paying an additional £1,823.75 in interest over the life of the debt.

"Credit card providers are tightening their criteria and anyone with a less than perfect credit history may struggle to get the most competitive deals. However, for those with an exemplary credit record there are still good deals to be had."

The first thing to do when looking for a new credit card is to look at how you will use the card, advised Ms Slade.

"If you have an existing debt on a card, it may be worth considering a 0% balance transfer deal. Currently balance transfers best buys are topped by Virgin Money's MasterCard which offers 0% for 15 months," she said.

For those looking to make some new purchases, a 0% introductory purchase deal is suggested.

HSBC's Bank Credit Card MasterCard is currently offering 0% for 12 months, while Barclaycard's Simplicity Visa at 6.8 per cent is an attractive deal for those looking for a low rate card.

Ms Slade said: "Rates and charges on credit cards are only likely to continue to increase in the months ahead.

"If you are not happy with you current deal, make sure you shop around for a better one."


Samantha Owens, head of personal finance at Moneyfacts.co.uk, added: “Competition in the balance transfer and introductory rate market continues to grow this week with Capital One extending its 0% deals for both purchases and transfers to September 1st 2009.

“Whilst there has been growing concern in the credit card market, with a reduction in the number of applications accepted and providers increasing rates for both purchases and cash, the deals on offer at the top end of the market have not been affected.

“This new Capital One deal offers 0% for nearly 15 months, which is one of the longest deals we have seen. That the card offers this for both balance transfers and purchases is rare and means consumers do not have to worry about one deal ending, negating any benefits on the other deal."