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UK credit card borrowing costs have skyrocketed to their highest levels in nearly 20 years as lower personal loan fees paved the way for consumers to tackle their debts.
According to data provider MoneyFacts UK, the average annual rate (APR) from the beginning of March to the start of June rose to 35.7 per cent, the highest since at least 2006.
The average interest rate for cash withdrawals from credit cards reached record levels over the same period, increasing from 29.4% a year ago to 30% today.
Despite the Bank of England’s reduction in base rates in May, credit card costs rose from 4.5% to 4.25%.
“Consumers who use credit cards for daily purchases will be disappointed that borrowing costs have risen to the highest point since records began almost 20 years ago,” said Rachel Springall of MoneyFacts.
She acknowledged that the “combination of factors” led to an increase, including rising purchasing fees over the period, including some providers such as Halifax.
According to an analysis by Money Charity, a financial education charity, the average credit card debt per household is £2,579.
At the same time, better personal loan transactions were offered, along with rising credit card borrowing costs. During the period from March to June, the average unprotected personal loan rate for trading £5,000 over three years has fallen since June 2023.
The fees for the £7,500 and £10,000 loans over the course of five years also recorded slight period cuts compared to the same hours last year.
Springall said unsecured personal loans are a “smart choice” for consumers struggling with multiple debts trying to consolidate them, especially if they are paying high interest rates on credit cards.
Lenders also offer a wide range of transactions to help people manage their debts. There are a number of free purchase offers jumping from 58 last year to 64 from March to June. The average credit card interest rate purchase period increased from 267 days in March to 286 in June.
