Thursday, February 3, 2011
Category:
Consolidation
According to Moneyfacts.co.uk, the average credit card rate has hit a thirteen year high.
At the end of the 1990s, increased competition in the credit card market reportedly saw rates beginning to fall; reaching their lowest level in 2006. However, we have since experienced the ‘credit crunch’, which has caused rates to steadily rise. Therefore, it has been reported that new customers can now expect an average credit card rate of 18.9 percent.
Spokesperson for Moneyfacts.co.uk, Michelle Slade, 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."
* Based on minimum repayment of 2.5%, min £5.
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Homeowners who are juggling several expensive credit card bills each month could consider taking out a
secured loan to tie all their debts up into one place. One of many finance options available, a secured loan for consolidation could leave borrowers with just one monthly repayment, which could even be lower than the sum of current outgoings. However, if opting for a secured loan to consolidate debt, it should be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
