Consumers hammered by soaring card rates

Findings from price-comparison service MoneyExpert.com show that while the offi cial cost of borrowing is at the lowest point in history, cardholders are paying an average 1.1 per cent more

in annual interest compared with two years ago. “This 1.1 per cent increase in the last two years may not seem huge, but with the UK’s credit card debt standing at £64.8billion, this equates

to an extra £712 million annual income for the card companies,” said MoneyExpert spokesman Sean Gardner. “With card rates so high, it’s clear that providers have given up following the Bank

of England’s lead when it comes to lending.” MoneyExpert says customers will now pay an average 0.9 per cent more on purchases than they would have done two years ago, 0.7 per cent more on

balance transfers, and 1.7 per cent more on cash advances. Separate findings from Moneynet.co.uk, another price-comparison service, show that in the last 12 months, the average annual

percentage rate (APR) for purchases has increased by 1 per cent to 17.8 per cent. This is despite the base rate having plummeted from 5 per cent in September to just 0.5 per cent in March.

Earlier this month, the Bank voted to keep rates on hold — and it is now widely predicted that interest rates will remain at this level for the foreseeable future. But while the cost of

borrowing should reduce when the base rate falls, quite the reverse has been happening. “It’s incredible that the card companies continue to try to squeeze more and more from their

cardholders in an environment where the base rate has fallen so rapidly,” said Moneynet’s Andrew Hagger. This is especially surprising given the recent Government promise to take measures

against credit card companies that fail to pass on the latest interest rate cuts. In the past six months alone, there have been a host of rate increases, according to Moneynet. Sky, for

example, has pushed its purchase rate up from 16.9 to 17.9 per cent, while Halifax and the Bank of Scotland have increased their rates from 15.9 to 16.9 per cent. Several providers have also

introduced other fee increases. “Yorkshire Bank and Clydesdale Bank have increased the foreign usage fee on their Gold cards from 2.75 per cent to 2.95 per cent, while John Lewis Financial

Services has increased its balance transfer fee from a maximum of 2 per cent — or £50 — to 2.5 per cent, with no maximum,” said Hagger. “Elsewhere, HSBC has put its balance transfer fee up

from 2.5 per cent to 2.9 per cent and its foreign usage fee up from 2.75 per cent to 2.99 per cent.” A spokeswoman from payments body Apacs said that it was only because of the economic

climate that average APR levels had “increased slightly”. She added: “This is a result of the increased level of risk in lending.” Nonetheless, cardholders are urged to shop around. “Keep a

close eye on your statement,” said Hagger. “There’s little point in remaining loyal to a card provider — so check the best-buy tables and be prepared to switch.” For those looking for a new

deal, Gardner picks out cards from Abbey and Virgin Money. Both are both 15 months interest-free on balance transfers and 0 per cent introductory purchase deals of three months and six

months respectively.