Now banks raise credit card costs

Banks have increased interest rates on credit and debit cards held by tens of millions of shoppers despite the cost of borrowing falling to its lowest level for more than 50 years, research for The Independent reveals today.

The Bank of England has almost halved its base rate from 5 to 3 per cent since May, but during the same period the average annual percentage rate for credit cards has climbed from 17.2 to 17.6 per cent. Store cards – already in the spotlight after being accused of carrying excessive rates – have hit a peak of 25 per cent, and the high street chains Principles, Karen Millen and Oasis have raised charges for their in-store cards by 4 percentage points – almost a sixth – to 28.9 per cent.

More than £200bn is owed by Britons in unsecured borrowing, including personal loans, overdrafts and credit and store cards – almost one-fifth of total lending.

While the banks have been heavily criticised for failing to pass on the Bank of England's interest rate cut to their customers, so far providers of "plastic" – which include the same banks and some specialist players – have escaped scrutiny for failing to do likewise with their credit cards.

A study of 240 credit cards for The Independent by the banking research group Defaqto shows that between May and November the average interest rate has risen by 0.4 per cent. Some have risen faster – such as the NatWest credit card, which has risen from 13.9 per cent to 16.9 per cent, while HSBC's credit card and the Virgin Money Mastercard have both climbed one percentage point to the same mark. Credit card companies have also raised charges for withdrawing money from cash machines in Britain and abroad.

Statistics from the financial website show that average rates for 33 store cards from major high street chains such as Argos, House of Fraser and Marks & Spencer rose from 24.4 per cent to 25.4 per cent.

The Creation Account Card, which can be used in stores including Sainsbury's, Woolworths, JJB Sports and Selfridges, charges 30.9 per cent APR for payment other than by direct debit. Burton's card charges 29.9 APR on payment by any means. Only one store card, from Fortnum and Mason, boasts an APR which, at 15.3 per cent, is below the credit card average.

Financial experts warned shoppers to use the cards stintingly, if at all. Sean Gardner, the director of, said: "When it comes to borrowing, [store cards] are a complete rip-off. But with other forms of credit running dry, desperate consumers [may] be tempted into expensive deals as a last resort for Christmas." Research from last year showed that one in 10 people was still clearing Christmas debts from 12 months ago.

David Black, of Defaqto, said that credit card companies were probably trying to recoup the cost of bad debts, rising levels of fraud and customers making use of 0 per cent balance-transfer discounts. Falling sales of payment protection insurance, following a high-profile consumer campaign against rip-off rates, also meant less revenue for card providers. Customers were penalised for staying loyal when they should be looking around for the best rates, he suggested.

But Apacs, the payments association that represents credit card providers, said banks did not set credit card rates according to the Bank base rate: "While the interest rate is considered when [rates] are set, you must also factor in the cost borne in providing the service." A spokesman added that the gap between the base rate and the average credit card APR was at "historically low levels ... Essentially, the credit card market is extremely competitive."

Which?, the consumer group, warned customers not to put spending on store cards. Teresa Fritz, Which? personal finance campaigner, said: "We would say to consumers: there are better places to borrow. Never borrow on a store card. Even for people with a poor credit history or no credit history, there are better places to go; credit unions being one." Ms Fritz added: "People take store cards after being told: 'You get 10 per cent off if you take out one today,' without thinking about the rate of interest."

The Liberal Democrats said card companies that had passed on rises in the base rate should do the opposite when they fall. "Store cards already charge huge rates of interest to often unknowing and vulnerable customers," a spokesman said. "This adds insult to injury."

peopleJonathan Ross has got a left-field suggestion to replace Clarkson
Johnny Depp is perhaps best known for his role as Jack Sparrow in Pirates of the Caribbean
peopleBut how did he break it?
Andy Davidhazy at the beginning (left) and end (right) of his hike
Arts and Entertainment
The teaser trailer has provoked more questions than answers
filmBut what is Bond's 'secret' that Moneypenny is talking about?
footballDoes Hodgson's England team have an identity yet?
Lewis Hamilton secured his second straight pole of the season
f1Vettel beats Rosberg into third after thunderstorm delays qualifying
travel Dreamland Margate, Britain’s oldest amusement park, is set to reopen
Founders James Brown and Tim Southwell with a mock-up of the first ever ‘Loaded’ magazine in 1994
Threlfall says: 'I am a guardian of the reality keys. I think I drive directors nuts'
voices The group has just unveiled a billion dollar plan to help nurse the British countryside back to health
The Westgate, a gay pub in the centre of Gloucester which played host to drag queens, has closed
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

    The saffron censorship that governs India

    Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
    Prince Charles' 'black spider' letters to be published 'within weeks'

    Prince Charles' 'black spider' letters to be published 'within weeks'

    Supreme Court rules Dominic Grieve's ministerial veto was invalid
    Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

    How did fandom get so dark?

    Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
    The galaxy collisions that shed light on unseen parallel Universe

    The cosmic collisions that have shed light on unseen parallel Universe

    Dark matter study gives scientists insight into mystery of space
    The Swedes are adding a gender-neutral pronoun to their dictionary

    Swedes introduce gender-neutral pronoun

    Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
    Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

    Disney's mega money-making formula

    'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
    Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

    Lobster has gone mainstream

    Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
    Easter 2015: 14 best decorations

    14 best Easter decorations

    Get into the Easter spirit with our pick of accessories, ornaments and tableware
    Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

    Paul Scholes column

    Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
    Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

    The future of GM

    The greenhouses where Monsanto 'plays God' with the future of the planet
    Britain's mild winters could be numbered: why global warming is leaving UK chillier

    Britain's mild winters could be numbered

    Gulf Stream is slowing down faster than ever, scientists say
    Government gives £250,000 to Independent appeal

    Government gives £250,000 to Independent appeal

    Donation brings total raised by Homeless Veterans campaign to at least £1.25m
    Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

    The most borrowed book at Bank of England library? Oh dear

    The book's fifth edition is used for Edexcel exams
    Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

    Cowslips vs honeysuckle

    It's the hunt for UK’s favourite wildflower
    Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

    Did a botched blackmail attempt help Cyril Smith escape justice?

    A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss