Money News

Bank leaves rate unchanged but card companies hike APRs

By Martin Fagan - news@consumerchoices.co.uk

Despite base rate staying at an historic low for over two years, credit card companies have steadily increased APRs, says Defaqto.

For the 27th consecutive month, the Bank of England’s Monetary Policy Committee (MPC) has decided to hold rates at 0.5%.

However, credit card companies have been stealthily increasing the APRs on their cards over the last two years, according to new research.

Despite a very low base rate, the cost of borrowing on the average credit card has become progressively more expensive over the last four years, according to analysis by independent financial research company, Defaqto.

Although a static base rate means joy for mortgage borrowers, people with outstanding balances on their credit cards are being hammered with high rates for their short-term borrowing.

According to Defaqto, in July 2007, the base rate was 5.75% and the average credit card APR was 16.6%, a difference of 10.85%.

However, in June 2011 the average APR stood 18.1% higher than the base rate. This means, over a four-year period, the average APR has risen by 12.6%.

“Over the course of the last few years, we’ve seen a significant increase in the standard interest rates charged by credit card companies,” said David Black, banking insight analyst at Defaqto.

“Therefore consumers with excellent credit ratings should be proactive and regularly review their existing credit cards to see whether they can get a better deal elsewhere.”