Rising costs for credit card customers

A recent report has shown how credit card customers in the UK are continuing to be hit by rising costs, with credit card companies having hiked up a range of related fees and charges over the past two years, making financial management even more difficult for many already cash-strapped households.

According to one industry official: ‘In April 2006 the average purchase rate on a credit card was 14.9%; today this has jumped to 16.4%. Previously, whereas only a select number of customers were being penalised, now all borrowers are paying the price. For any customer who is paying their bill in full each month, the rate increase will have no impact, but with many households struggling with increasing financial pressures, those who only repay the minimum will be hardest hit. Anyone with a balance of £5,000 repaying just 2.5% per month will end up paying an additional £755 in interest from the 1.5% increase in purchase rates.’

She also said: ‘The average interest rate for cash transactions have seen a marked increase from 18.1% to 24.3%. On top of this, the majority of institutions have increased cash advance charges. Previously the majority charged 2%, with a minimum of £2: now the majority charge 3%, with a minimum of £3.’

She added: ‘Taking cash out on credit cards has always been an expensive way of borrowing, particularly as interest is charged from day one. But with the 6.2 percentage-point increase in the average rate, customers who are relying on cash advances to balance their monthly budget will find a bad situation is now even worse.’