Since the City watchdog stopped banks profiting from customers’ debts at the start of the year, card providers have put up interest rates by about two per cent, to an average 19.1 per cent - its highest level in 13 years - despite the Bank of England’s base rate remaining at the record low of 0.5 per cent.
The biggest hikes, according to comparison site Moneyfacts, were introduced by the Bank of Scotland and Halifax, who are owned by taxpayer bailed-out Lloyds Banking Group.
Bank of Scotland’s All in One MasterCard raised its rate by 2 per cent. Elsewhere, Barclaycard’s Platinum Simplicity Visa has put up the cost of borrowing by 1.1 per cent, and Santander’s Zero and NatWest’s Advantage Gold credit cards interest rates are both 1 per cent more. Some 18 cards have seen rate hikes since the start of the year.
Ideally, all credit card holders should repay their balance in full each month to avoid paying interest. But for those who can’t afford to do so, Moneyfacts spokesman Michelle Slade has further bad news, warning more rate rises are likely.
“Still, customers are now being offered the longest ever 0% balance transfer and introductory purchase deals ever seen,” she points out. “Providers hope to bank on customers’ reluctance to keep switching and can claw back the lost interest during intro periods once they end.”
Don’t be a lazy customer. If you’ve built up debt, switch to an interest-free deal. Barclaycard’s Platinum Balance Transfer offers a 20-month interest-free period on balance transfers, for a one-off 3.2 per cent fee. Virgin Money Mastercard offers the same for 18 months, for a 2.89 per cent fee. Move your money to save wasting it.