Credit card interest rates in the UK have hit the highest level in 13 years, according to the Financial Times.
Per the report, the average annual percentage rate (APR) reached 24.7% in September - the highest since financial website Moneyfacts.co.uk began recording data. The average APR was 23.4% this time last year.
"Consumers who turn to credit cards for their everyday purchases will find that the cost to borrow is starting to rise, as the most lucrative low rate cards have worsened," said moneyfacts' Rachel Springall.
"In fact, over the past quarter, we said goodbye to the lowest rate purchase credit card on the market and have seen rates increase on these lucrative offers."
This decoupling of soaring credit card rates from flat-to-falling wholesale money rates echoes that of the US where credit card rates have exploded higher in recent months...
Lenders, meanwhile, have been eliminating low-interest-rate deals after the Financial Conduct Authority (FCA) enacted new rules designed to clamp down on spiralling debts.
Tesco Bank recently pulled its 5.9 per cent Clubcard credit card, which was the lowest rate card on the market. Bank of Scotland, Halifax and Lloyds Bank increased the purchase rate on their credit cards from 6.4 per cent to 9.9 per cent. Related: From Millennial To Millionaire With One Simple Trick
Ms Springall pointed out that consumers may be making more efforts to move their debts to an interest-free alternative or clear their balances altogether. According to recent findings from UK Finance, the industry body, there has been a decline in the proportion of credit card balances that bear interest, falling from 54.6 per cent to 53.4 per compared to a year ago. The annual growth rate of outstanding balances has also fallen to 3.6 per cent, down from its peak of 8.3 per cent at the start of 2018. -Financial Times
"Once you are a customer, your card provider can increase your rate if they feel there has been a change in your financial circumstances and they see you as a greater risk," said personal finance expert and founder of consumer website MoneyComms, Andrew Hagger, who added "For those people struggling with their finances, the last thing they need is a higher rate on their plastic."
More Top Reads From Safehaven.com: