Average credit card purchase rate tops 18%

by Gill Montia

Story link: Average credit card purchase rate tops 18%

Latest figures from Moneyfacts.co.uk show that credit card purchase rates are continuing to rise.

The financial website estimates the average rate at 18.1% today, up from 16.3% two years ago.

The increase reflects hikes in rates for existing customers, the withdrawal of competitive deals and the introduction of new cards with higher APRs than previously may have been seen.

Twelve providers have increased rates in the past six months, including American Express, Bank of Scotland, Capital One Bank, Halifax and Nationwide BS, according to Moneyfacts.

The firm’s analyst, Michelle Slade, warns: “Customers who repay just the minimum will be hardest hit with an additional £408 in interest now being payable on a modest balance of £2,000.”

She blames rising unemployment, which increases the risk of repayment defaults, for the extra burden and referring to the recession and property market downturn describes unsecured lending as “one of first casualties” as homeowners “fight to keep hold of their property”.

While competitive credit card deals are still out there, with 0% balance transfer deals available for 16 months and 0% introductory purchase deals for 12 months, only those with “exemplary” credit histories are likely to be accepted, according to Ms Slade.