Rising credit card charges will bring little cheer to Christmas

Cost of borrowing has gone up despite recent interest rate cuts

By Ian Forsyth

Published:

EXTRA BURDEN: The average rate across all cards has increased from 16.8% to 17.2%

Consumers looking to fund their Christmas with their credit card are going to find the cost of borrowing has increased significantly, despite recent interest rate cuts.

That is the depressing news from Moneyfacts.co.uk, a provider of personal finance information.

It says that, since August, there have been numerous increases to rates and charges on cards for new customers, including:

16 cards increasing purchase APRs.

12 cards increasing cash-per-annum rates.

11 cards increasing balance-transfer fees.

Seven cards increasing cash-advance fees.

Seven providers reducing the number of interest-free days.

Four cards increasing foreign usage fees.

On top of this, some providers have slashed their 0% balance transfer deal terms.

Michelle Slade, analyst at Moneyfacts.co.uk, said: “During the past year, card companies have continued to increase the charges on their cards and consumers will find they will be stung more than ever before.

“Paying just the minimum is the biggest mistake many consumers make. If you can’t repay in full, then even paying a small amount over the minimum could reduce significantly the amount of interest and time to repay the debt.

“In the last three months alone, the average rate across all cards has increased from 16.8% to 17.2%. Just like on mortgages, card companies are factoring in a much bigger margin for the risk of consumers defaulting, so rates are going up rather than down.

“In the last three months, Abbey, Halifax, Sainsbury’s Finance and Sky have reduced their 0% deals. Even more disappointing for customers is that big-name brands Mint, NatWest, Royal Bank of Scotland and Capital One Bank have withdrawn 0% balance transfer deals altogether.

“Consumers can still find 0% balance transfer deals over 12 months. However, these deals are starting to reduce fast and consumers could find they have nowhere left to switch their debt too and will have no choice but to pay the higher APR.”