The level of credit card debt may be substantially higher than it might otherwise be due to the average card rate charged comparing unfavourably with …
The level of credit card debt may be substantially higher than it might otherwise be due to the average card rate charged comparing unfavourably with those available before the credit crunch.
A study by Defaqto noted that the typical annual purchase rate (APR) for cards was 16.6 per cent in July 2007, the month before the credit crunch began, when the Bank of England base rate was 5.75 per cent.
Today (June 9th), the base rate has just been held by the bank at a record low level of 0.5 per cent for the 27th month in a row, yet the average APR is 18.7 per cent.
Explaining why this has happened, Defaqto’s insight analyst for banking David Black remarked that cards have become harder to get hold of since the onset of the credit crunch, stating that “providers are generally much more prudent” when it comes to choosing who to accept.
He added: “Reflecting this, personal pricing – whereby cardholders may be charged different rates of interest for the same card based on the individual’s perceived credit risk – is now firmly entrenched in the credit card industry.”
Those with cards who are running up debt may find it is worth taking out loans to pay these off, as one loan consolidating various cards may save cash in terms of interest and monthly payments.
Credit card debt is added to by Britons every day, with figures from Credit Action for April revealing the total value of transactions during that month was worth £1.156 billion per day.
Posted by Paul Thacker