Credit Card Interest Rates Rising

New research conducted by Moneyfacts has revealed that credit card interest rates in the UK have hit a twelve year high.

The main bank rate has remained at 0.5%, hover that has not stopped the rise and now the average interest rate paid on a credit card hit 18.8% in February.  According to the research, this has been due to growing fears amongst banks and other lending companies that buyers are more likely than ever to default on repayments.

There are also Bank of England figures that support this with default rates hitting a three year high.

Write-Offs

Further figures from the Bank of England have also revealed that there has been a massive increase in the amount of bad debt write offs that banks have been forced into on their credit cards.

Borrower defaults and write offs are the main causes in the growing difference between the Bank of England’s Bank rate and the rate banks are charging their customers. The Bank rate has been stood at 0.5% for almost a year now.

The third quarter of 2009 saw a 100% rise in the amount of money written off as banks acknowledge that they money could not have been recuperated from defaulting borrowers.  Quarters one and two saw around £800million written off compared to around £1.6bn in quarter three. The total of these three quarters was equal to the whole of 2008.

Official figures showed that the average interest rate charged in credit cards in January was 16.4%, but the figure is expected to rise this month to the aforementioned 18.8%.

Posted at 11:34AM Feb 16, 2010 by Marc Stenton in The Economy  |  Comments[0]