Research by the data firm Moneyfacts has confirmed that the average credit card interest rate has hit a record high, and that most of the teaser rate deals and offers have been removed altogether.
The data shows the average APR rose to 24.7% in September 2019, a 1.3% increase on the 23.4% figure from this time last year. It is the highest figure since records began in 2006.
Furthermore from the period June 2019-August 2019, several lenders significantly increase the rates they charge some customers to borrow.
Halifax, Bank of Scotland and Lloyds Bank increased the purchase rate on their credit cards from 6.4%, to 9.9%, whilst the APR on MBNA’s 0% balance transfer cards went up 1% from 19.9% to 20.9%. Also during this time Tesco Bank withdrew its Club card credit card which charged just 5.9%, and was indeed the most competitive rate on the market at that time.
Whilst such change is bad news for those looking to borrow, unsecured loans rates remain at near record lows so it is a very good time to consider that as an option. Plus overall the number of people paying credit card interest has slightly fallen with Data from UK Finance showing the proportion of credit card balances that bear interest has decreased to 53.4% down from 54.6% last year.
Finance expert at Moneyfacts, Rachel Springall said: “Consumers who turn to credit cards for their everyday purchases will find that the cost to borrow is starting to rise. Credit card customers should take every opportunity to pay more than the minimum requirement, particularly if they have an interest-bearing card.
“A borrower who makes a purchase of £3,000 on a typical credit card and repays just £100 per month will have their debt linger over for three years and it will cost them £970 in interest. This alone then should reaffirm the importance to clear debts faster or take advantage of an interest-free deal to give customers more time to spread repayments.”