While the overall benchmark rate of interest in Europe has gone into the negative and some European banks charging fees from customers to hold their money, the scene in the credit card industry is entirely different. According to reports, there are a number of credit card providers who have been increasing the rate of interests that users need to pay if they are unable to pay off the previous month’s card usage bill in full every month.

An average rate (APR) of 24.7 per cent was hit in September as interest rate for those users of credit cards who used them to make purchases, according to data website Moneyfacts. That rate of interest was the highest noted by the company ever since it had begun to keep track of the rates of interest charged by credit card companies since 2006.

For example, the website says that Tesco Bank pulled its Clubcard credit card within the last three months, which at 5.9% was, according to the British retailer, the card with the lowest rate on the market.

The rate of interest on purchases using their credit cards had been increased by Bank of Scotland, Halifax and Lloyds Bank in the same period under consideration. Rate of interest on outstanding amount was also raised by MBNA as well as by its rival provider IHG Rewards Club.

Within the United Kingdom, many citizens and credit card users could be shocked when they consider the APR increases because earlier this week, the Bank of England decided to hold its base interest rate at only 0.75 per cent while the United States Federal Reserve, the US central bank and monetary policy setter, has been continuously cutting interest rates to prop up the economy.

There are also predictions being made by a section of analysts and economists about whether the rate of interest in the UK would go down to or even below the zero mark. This reflected the manner in which some of the leading savings providers of the UK were engaged in bringing down their interest rates close to the benchmark rate set by the BoE.

About 53 per cent of the credit card holders in the UK are being forced to pay some interest on their credit at the much higher rates mentioned here, according to the latest data from banking body UK Finance, said Rachel Springall, a finance expert at Moneyfacts.

“Credit card customers should take every opportunity to pay more than the minimum repayment. A borrower who makes a purchase of £3,000 on a typical credit card, and repays £100 per month, will have the debt linger for over three years, and it will cost them £970 in interest,” she says.

“This alone, then, should reaffirm the importance of clearing the debt as fast as possible, or to switching the debt over to an interest-free deal.”

(Adapted from TheGuardian.com)

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