Interest on credit cards soars while base rate is lowest ever
Banks are cashing in on credit card borrowing as interest rates hit a 12-year peak, financial experts have claimed.
It has also emerged that some Northern Ireland customers could be paying more than their British counterparts for the privilege of using plastic.
Amid widespread criticism, borrowers have been warned to check the rates being offered by their providers to shield them from hefty penalties.
And Northern Ireland’s Consumer Council is also calling for more vigilance when using credit cards to make purchases.
“Given that the average credit card interest rate has increased, it is more important than ever that consumers check their statements,” said Julie McCurley, the watchdog’s head of money affairs.
“People know how much they have borrowed and the interest rate they will have to pay – and if you are not getting a good deal it is worth the effort to shop around for a better one.
“Northern Ireland comes bottom of the UK league when it comes to being financially savvy so consumers here definitely need help to manage their finances better and to make informed choices about their money.”
New figures suggests the average APR on plastic now stands at 18.8%, despite the Bank of England’s base rate having fallen to a record low of 0.5%.
Data supplied by the price comparison website Moneyfacts shows that credit card rates have climbed by more than a quarter since falling to 14.8% in February 2006 — their lowest level in the past decade.
The base rate then stood at 4.5% but, by the time the Bank of England’s official rate reached 5.5% in February 2008, average credit cards had soared to 16.8%.
Head of Economics at Ulster University Mike Smyth said he believed customers were being “ripped off”.
“It’s totally perverse and counter-intuitive and you really need to question the motivation of the big banks,” he said.
Currently, Northern Bank charges 48.9% interest on its Platinum Mastercard — a whopping 100 times the base rate.
The news comes as another report indicates the reliance placed on credit cards by British consumers. A survey by price comparison firm moneysupermarket.com suggests that one in five adults have three or more cards.
Furthermore, around 14 million people in the UK use credit cards to pay for day-to-day expenses.