Credit Card Rates Soar

Credit card providers have increased rates by between 0.6% and 2.0% (See appendix for full list of increases. As a result of the increases, the average interest rate charged on credit cards now stands at 19.1%, the highest level in 13 years.

Michelle Slade, spokesperson for Moneyfacts.co.uk, commented:

"At the start of 2011 card providers moved to a positive order of repayments as recommended by the Office for Fair Trading, which has dented the revenue levels they can earn from customers. Card providers have also been hit by the PPI ruling which has seen them having to repay money to customers deemed to have been mis-sold the insurance.

"At the same time, there has been a sharp increase in the number of providers raising the interest rates charged on their credit cards. Several of the biggest providers of credit cards, including Barclaycard, Halifax, Royal Bank of Scotland and Santander, have been party to the increases.

"It is unlikely we have seen the last of the increases and Moneyfacts expects more providers to follow suit. While credit card interest rates have risen, customers are now being offered the longest ever 0% balance transfer and introductory purchase deals ever seen.

"Providers hope to bank on customers' reluctance to keep switching and can claw back the lost interest during intro periods once they end. In an ideal world customers should look to repay their balance in full each month; that way no interest is payable."