Credit and store card rates nudge ever upwards

by Gill Montia

Story link: Credit and store card rates nudge ever upwards

The cost of borrowing on bank and store credit cards is continuing to rise, despite recent cuts in the Bank of England’s base rate.

Latest research from financial analyst, Defaqto, shows the average annual percentage rate for credit cards rising from 17.2% in May to 17.6% today, while over the same period the base rate has fallen from 5% to 3%.

The study of 240 credit cards found that NatWest’s credit card rate has increased 3% since May, to 16.9%.

Virgin Money Mastercard and HSBC are also charging interest at 16.9%, having increased rates 1% since the spring.

Store card providers are some of the worst offenders; rates charged by retailers Principles, Karen Millen and Oasis have risen by 4% to 28.9%.

Borrowers are often tempted to apply for cards by discount offers on initial purchases that are unlikely to offset the huge interest payments that could become due in the future.

Meanwhile, consumers withdrawing cash on credit cards in the UK and overseas were already paying a typical 24.4% in interest in May and the rate has now nudged up to 25.2%.

This month, the base rate has fallen to a fifty-year low but it would seem that credit card providers are too busy recovering their losses from bad debts, fraud and attractive balance transfer offers to have noticed.