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Credit Card Issuers Turn Up the Heat

11-August-2008, Writes Dan Drage dan.drage@consumerchoices.co.uk

Has the credit crunch reached its zenith? Credit card issuers certainly think so.

Credit card issuers are turning the screw on UK borrowers, with the average credit card interest rate hitting 17.4% last month according to MoneyExpert.

Standard rates have risen by 0.6% from 16.8% since February this year despite two Bank of England rate cuts from 5.5% to 5% over the same period. In essence, more than 72 cards now charge standard rates of 17.9% or higher compared with just 59 in February.

Low rate cards still exist, such as Barclaycard Simplicity (www.barclaycard.co.uk) and Capital One Platinum (www.capitalone.co.uk), but other low-charging cards have either disappeared or raised rates.

Sean Gardner, Director at MoneyExpert, had the following to say:

“Homeowners have been the most visible losers in the credit crunch but credit card customers are also sharing the pain. Mortgage customers might complain about rates of six or seven per cent but for credit card customers the charges are much higher”

He continues:

“There is however still plenty of choice in the credit card market and a lot of competition. Customers paying higher rates on debts should review their credit card as a matter of urgency and switch.”

Chris Eagle, Commercial Manager at Credit Choices, has the lowdown on low APR credit cards:

“Low APR cards offer a lower than average rate of interest on your balance. While you won’t avoid paying interest each month, it will always be at a much lower rate than standard APR cards”

He continues:

“The drawback of the low APR card is its tiered interest repayment mechanism. The ‘cheapest’ part of your debt is paid off first, and those purchases carrying the highest rates of interest are paid off last, so be mindful of this.”

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