Millions of credit card holders are being squeezed by the highest interest rates in more than a decade, according to new research.
Despite the Bank of England’s base rate being at 0.5 per cent, average credit card interest rates have risen to 18.8 per cent.
Experts said that card providers were passing on the cost of an increase in defaults caused by rising unemployment and bad debts. The charges were also a consequence of tighter Government regulation.
Any credit card holders with a £5,000 debt, and who pay off the minimum 2.5 per cent each month, will repay on average £2,289 more than three years ago.
The last time interest rates hit today’s levels was in 1999, when the base rate was 6 per cent.
Borrowers who became used to switching their debts between cards promising 0 per cent introductory offers have been affected by a sharp tightening of lending critera. Figures from the UK Payment Association found that around half of all applications for credit cards were rejected last year.