Popular deals to cost credit card customers hundreds of pounds extra
Credit card customers face paying hundreds of pounds more for popular deals despite the low interest rate environment, according to analysis from a financial website.
Moneyfacts.co.uk said several card firms have been hiking their interest rates or fees since the start of the year, despite the Bank of England base rate sitting at ultra-low levels, making the cost of borrowing cheaper.
The increases have come at a time when there has been a strong appetite among consumers for credit card borrowing.
Recent figures from the British Bankers' Association (BBA) show consumer credit has been growing at its fastest levels in nearly a decade.
Moneyfacts' data showed that in recent months, the annual interest rate offered on HSBC's Premier Credit Card Mastercard had increased from 11.9% to 18.9%. Someone with a £4,000 debt paying off £150 a month would end up paying £469 more, according to Moneyfacts' calculations.
Meanwhile, the interest rate on NatWest's Reward Credit Card MasterCard has increased from 12.9% to 18.9% and the annual fee on Santander's 123 Credit Card Mastercard has increased from £24 to £36.
Experts said banks have been raising their rates in response to a recent cap on the amount card companies can charge merchants for carrying out transactions.
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: " The increasing cost to borrow on credit cards has been blamed on the new EU interchange fee caps as card companies attempt to sustain offers whilst seeing a reduction in card processing fees.
"It's worrying news for these rises to be significantly high in some cases and it will frustrate many consumers, particularly those struggling with debt."
She warned that borrowers could find themselves getting comfortable with only making t he minimum repayments on their cards with high rates of interest.
Ms Springall continued: "Loans and credit card debts leave a financial footprint, so keeping up with repayments and reducing debt is imperative."
Richard Koch, head of policy at the UK Cards Association, insisted there is still "plenty of good value" in the credit card market.
He said: "The EU cap on interchange fees, which came in last December, will cost card companies an estimated £750 million in lost income.
"While there has been a recent rise in APRs, there's still plenty of good value in the credit card market, with a wide range of competitive products and many 0% deals for new and existing customers of up to 42 months.
"Forty-three per cent of all outstanding credit card balances do not attract any interest at all - the highest level it's ever been."