Credit card interest rates have been rising
Over recent months the Bank of England has reduced the base interest rate three times, with the three 0.25% cuts taking the base rate from 5.75% to 5% between December of last year and April of this year.
Whilst this should spell good news for borrowers reports have shown that lenders are continuing to raise their interest rates as a result of the effects of the credit crunch, which means that many borrowers may not be any better off despite the base rate cuts.
Costs have gone up in many areas of borrowing, such as loans, mortgages, and credit cards, all of which have had an adverse effect on consumers’ affordability and a knock on effect on the economy.
The research shows that the average credit card interest rate has risen by more than half a percent in the last six months despite the 0.75% cuts that have been applied over the past few months.
In addition to the average credit card interest rate going up – rising to an average 17.12% - the average balance transfer rate has also risen, going up by around 0.83% to 15.95%.
Experts have stated that borrowers are really having to pay the price of the global credit crunch by paying increased fees on their borrowing even though the base rate has been falling.
One industry official said: “Most of us would normally seek out a new zero per cent deal to tide us over the bad times, but with lenders playing a cautious game, getting one of those cards is more difficult than it used to be. This means more of us will have to use our current credit card and if the 0 percent deal has expired, you’ll be borrowing money at a rate of around 16 percent; be careful what you spend on the plastic because the interest will soon mount up.”
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