Reno Charlton, award-winning writer, shares her financial expertise as a contributing columnist for Credit Card Comparison, where you can compare instant decision credit cards.
When we take out a credit card most of us do our best to try and find a card that offers a competitive rate of interest on borrowing. However, the problems can occur when credit card providers start to hike up the interest rates that they charge on their cards, although this is something that many people may not have imagined happening given that the base interest rate has plunged to an all time low of just 0.5 percent over the past seven months.
However, it seems that for many credit card providers reducing the credit card interest rate in line with Bank of England base rate movement is not an option, and whilst the base rate has plummeted to just a tenth of the level that it was at around ten months ago credit card interest rates have continued to soar. In fact, it has been reported that the average credit card interest rate has now smashed through the eighteen percent barrier, leaving struggling consumers to deal with crippling interest payments in what is an already difficult financial climate.
The higher interest rates could mean that you pay far more in interest over the term of the debt. For example, if you have a credit card balance of two thousand pounds, and you make only the minimum repayment each month, you could pay over four hundred pounds extra in interest alone over the term of the debt based on these higher interest rates.
One industry official has recently commented on the situation, stating: "Rising unemployment means that the risk of customers defaulting on their card repayments has increased, which is being passed on through higher rates. If customers are struggling with repayments, unsecured lending is one of the first casualties as customers fight to keep hold of their property. With only a handful of cards on the market linked to tracking base rate, very few have seen any benefit from the current all time low base rate."
Those that do find that their credit card interest rates have rocketed may find that it pays to compare credit cards and find a more affordable credit card deal, or better still a 0% balance transfer credit card deal, as there are still some around. This could save the average consumer a small fortune in interest if they have a current balance outstanding.
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