Average credit card rate hits 13 year high

Increased competition in the credit card market at the end of the 1990s meant rates started to fall, dropping to their lowest level in 2006.

Since 2006, as the economic downturn took hold, credit card rates have steadily increased, with the average rate for new customers today hitting a 13 year high of 18.9%.

Michelle Slade, spokesperson for Moneyfacts.co.uk, commented: "The UK continues to suffer from a high level of unemployment and providers are worried about the increased risk of customers not repaying their debts.

"This increased risk continues to be passed on to both new and existing credit card customers through higher interest rates.

"Borrowers with £5,000 debt on their card, who repay the minimum each month, will now repay an additional £2,360 over the life of the debt compared to February 2006.

"During the financial crisis many card companies reassessed their existing customer base and many customers have seen large increases in the rates they are charged.

"Customers who would previously have switched to another provider are now finding it's not so easy to do so.

"Competitive deals for balance transfers and introductory purchases remain on offer, but card providers are selective over exactly who they accept for these deals.

"Since the beginning of 2011 most card companies have moved to a positive order of repayments. This dent in their revenue stream is likely to mean customers will continue to see rates rise rather than fall."