People are facing increased credit card debt levels due to the risk of borrowers defaulting on their payments, it has been claimed.
Moneyfacts spokesperson Michelle Slade noted that credit card users are being charged higher prices to cover the cost of others who do not meet repayments.
“We are paying for this extra risk through higher rates,” she explained, adding that consumers may be experiencing more debt management issues due to factors such as unemployment.
And she warned against withdrawing cash using credit cards as interest rates for this service can hit 25 per cent a year.
Ms Slade stated that borrowers usually forgo payments on unsecured debt like credit cards or loans rather than secured debt – which includes mortgages – when they fall into difficulty.
However, ClearDebt advises that people should place more focus on repaying credit card balances, as these are among the most expensive forms of borrowing.
By Jamie Price