Credit Cards Shown To Be Increasing In Cost
Britons are beginning to find that using a credit card is becoming an increasingly costly form of borrowing, new research shows.
In a study carried out by MoneyExpert, it was revealed that the average annual percentage rate (APR) charged on credit card purchases has surged over the last six months. Currently standing at 17.12 per cent, such charges have gone up from 16.56 per cent noted in August 2007. Meanwhile, balance transfer rates have increased by 0.83 per cent from the 15.12 per cent up to 15.95 per cent. The news of such increases comes despite the Bank of England’s monetary policy committee opting to reduce the base rate of interest on three separate occasions during this period of time. At present interest rates stand at five per cent, down from the 5.75 per cent seen last August, with the most recent cut taking place last week.
Following on from an increased cost of credit card repayments, it may also be possible that consumers find that they are developing difficulties in managing other demands on their finances. Such areas could well include store cards, utility bills, mortgages and outstanding repayments on personal loans.
However as the credit crunch continues to take effect, the financial services firm reported that competitive card deals may be harder for consumers to come across and instead will have to stick with their current borrowing product which is becoming increasingly expensive. It was also pointed out that in recent weeks credit card providers have reduced the total spending limits of their customers by about 3.1 billion pounds.
Commenting on the figures, Sean Gardner, chief executive for MoneyExpert, said: “Everyone is finding it more difficult to make ends meet as the cost of living rises. People will want to turn to credit and that means splashing the cash on the plastic. Most of us would normally seek out a new zero per cent deal to tide us over the bad times, but with lenders playing a cautious game getting one of those cards is more difficult than it used to be. You’ll need to convince the card company that you can afford to repay your debts.”
Mr Gardner stated that upon the expiry of a zero per cent offer, consumers are likely to find that they will be borrowing money which charges an average rate in the region of 16 per cent. As such the MoneyExpert executive advised borrowers to “be careful what you spend on the plastic because the interest will soon mount up”. It was pointed that a balance of 3,500 pounds on a credit card charging 15.95 per cent in APR would see borrowers be charged annual interest of around 558 pounds.
Consumers who find that they are struggling to manage with rising credit card debts might wish to take out a debt consolidation loan. By selecting this type of loan, borrowers could discover that they can merge monies owed across a number of cards into a single low-rate monthly repayment. Getting a loan for the purposes of consolidation might also be of assistance to people struggling with mortgage repayments. Last month, research carried out by Moneyfacts showed that mortgage deals are becoming increasingly expensive and providers are tightening up their lending criteria. Furthermore, it was revealed that the number of mortgage deals on the market fell by 2,026 over the course of February to stand at 7,726.
Essentially Home Loans providing you with breaking debt consolidation loans news.