Credit card interest rates climb higher


Interest rates on unsecured lending have continued their upward trend, according to the latest figures from the Bank of England. The statistics show that credit card borrowing is becoming increasingly expensive, making it even more important for consumers to shop around for the best credit card deals.


Average credit card interest rates reach nine-year high
The average credit card interest rate rose to 16.79% in January, says the Bank of England. The recent spike follows a slight dip in December when the average rate dropped to 16.66% from 16.68% the previous month. However, it follows a general upward trend from the past few years -- with interest rates creeping up steadily each year. In fact, the last time credit card rates were this high was in February 2002, when the Bank of England recorded an average of 16.94%.

£5.3bn written off in 2010 as more Britons fall behind on payments
The figures also show that banks wrote off £5.3bn of credit card debt last year, indicating that Britons have had a harder time paying their bills. Losses have risen sharply since the mid-1990s, when write-offs totalled just £138m, according to the BBC. David Black, a spokesman for financial analysts Defaqto, told the news provider that the recent write-offs "probably reflect historic lending on cards". But, he added, "in recent years, card companies have been much more careful about who they will lend to, in terms of affordability and over-indebtedness."

High rates make it even more important for consumers to shop around for deals
While the average credit card interest rate may seem high, the very nature of averages means there are plenty of cards available with rates lower than 16.79%. Consumers who are looking for a new card should go online to compare credit cards, as this will give them a better idea of the variety on offers. Consumers should also bear in the mind that the interest rate is not the only thing that should be taken into consideration -- particularly if you can afford to pay off your balance each month. Many credit cards also offer features such as a 0% introductory period, cash back on purchases, reward points or attractive balance transfer deals.

See related: Credit card purchases fall 3m from 2009 to 2010; Do credit cards foster financial stability? 

Published: 10 March 2011