The latest news on credit card rates reveals that the cost of borrowing on a credit card is now at a 12 year high, prompting many to look around for alternative short term credit options.
Increased competition in the credit card market at the end of the 1990s meant that interest rates on credit cards started to fall, dropping to their lowest level in 2006. But since 2006 as the economic downturn began to bite, credit card rates have steadily increased, with the average rate today hitting a 12 year high of 18.8%.
The research, published by Moneyfacts.co.uk, coincides with similar research carried out by the company earlier in February, which shows that the cost of an average loan is at a nine year high. Read More: Unsecured Loans at 9 Year High.
“The UK continues to suffer from a high level of unemployment and providers are worried about the increased risk of customers not repaying their debts,” said Michelle Slade from the website.
This increased risk continues to be passed on to both new and existing credit card customers through higher rates.
“Borrowers with £5,000 debt on the card, who just repay the minimum each month, will now repay an additional £2,289 over the life of the debt than they would have in February 2006.”
Slade also added that other charges such as balance transfer, cash withdrawal and foreign transfer fees also continue to go up, leaving customers paying more across the board.
“Card companies are reassessing their existing customer base, resulting in numerous customers seeing a rise in their rate. Many such customers who would previously have switched to another provider are now finding it’s not so easy to do so,” concluded Slade.
Increase Cost of Credit Cards Makes Payday Loans More Affordable
As a result of the spiralling costs of using a credit card, as well as the reluctance of many companies to lend to individuals they perceive as a risk, more and more cash strapped Brits in employment are opting instead for payday loans to solve their emergency money worries.
If you face an unexpected bill or are overdrawn on your bank account and face hefty overdraft charges and need to sort out your money situation quickly, a payday loan could be the best option for you. You can access up to £750, with no credit check needed and you can apply quickly online.
Many customers prefer payday loans over credit cards as they know beforehand exactly how much they have to pay back at the end of the month, compared to the ‘never-never’ of credit card limits.
February 19th, 2010 at 9:37 am
[...] Loans at 9 Year High.) and interest on credit cards is at its highest for 12 years too. (Read More: Credit Card Interest at 12 Year High). Banks and lenders remain reluctant to lend money to anyone they see as a risk. But if you need a [...]
March 8th, 2010 at 9:06 am
[...] If the banks continue to keep credit card rates as these exceptionally high rates, there is no way consumers have a chance of paying off their debit. Credit card lending remains at a 12 year high in terms of the amount of interest borrowers have to pay back. Read More: Credit Card Interest at 12 Year High. [...]