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Frank Hovis

Interest Rates Highest Since 1998

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Now this is an area that actually prices in a risk premium, so it makes a lot of sense that they are this high now. Time for mortgage rates to do the same. Though I have given up on BoE base rate ever reflecting reality.

Credit card rates hit a 13-year high, leaving families squeezed by average interest of 18.9%

By Sean Poulter

Last updated at 11:15 PM on 1st February 2011

Banks have pushed up average credit card rates to the highest level in 13 years, turning the screw on customers battered by soaring living costs.

Families reeling from higher fuel, energy and food bills are being squeezed ‘till the pips squeak’, critics said.

The average credit card interest rate has hit 18.9 per cent, despite the Bank of England’s base rate having been at a 300-year low of just 0.5 per cent for nearly two years.

The last time the average rate was so high, in February 1998, the gap between it and the Bank of England base rate was 13.85 per cent. Today it is 18.4 per cent.

Some banks, including those majority-owned by the taxpayer, are effectively charging more than 50 per cent, once annual fees are taken into the equation.

This is delivering massive profit margins to the finance giants. They say the higher rates are needed to cover bad debts and because rising unemployment and pay curbs are making lending more risky.

Britons owe more than £52billion on credit cards. Interest at 18.9 per cent would add almost £10billion a year.

The sky-high rates could add thousands of pounds to the cost of settling a credit card balance, according to personal finance experts.

Liberal Democrat Treasury spokesman Lord Oakeshott said: ‘The banks might have an excuse for squeezing credit card borrowers till the pips squeak if they were pouring the profits into backing small businesses or first and second-time homebuyers. But they’re not.

‘The banks’ priorities are bonuses first and big borrowers second, with ordinary customers and taxpayers a bad third.’ Michelle Slade, spokesman for Moneyfacts.co.uk, which compiled the figures, said:

‘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 with February 2006.’

She said it was increasingly difficult for card users to switch to a rival bank as card providers are becoming more selective over who they accept.

Banking analysts at PricewaterhouseCoopers predict higher interest rates are here to stay. They warned: ‘Consumers will find it hard to absorb such large increases in debt interest payments without cutting back on spending.’

Research for housing charity Shelter suggests up to 2.6million have been forced to use their credit card to pay rent or the mortgage in the past year.

A Black credit card from NatWest and Royal Bank of Scotland charges 54.1 per cent, based on combining the interest rate with the annual fee.

Barclaycard, Capital One, MBNA and the Co-op Bank are charging around 30 per cent or more on some cards.

Brian Capon, of the British Bankers Association, said: ‘[The rates] reflect the risk factor and the cost to the issuer, including the cost of raising funds in the market place.’

A spokesman for the UK Payments Council, which speaks for the credit card industry, said it was wrong to compare APR on cards against the base rate.

He said: ‘A credit card APR is not an interest rate as it is obliged by legislation to reflect the total cost of credit. Even when interest rates are low, the costs of fraud, bad debt and operating an unsecured open-ended line of credit continue.’


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And the fools in our government wonder why banks are not creating more debt for their customers? (new loans).

The ship is going down and the LAST thing the banks want is to see our money go down with them. So long as the banksters have enough for a record bonus pot by Crimbo 2011 everything will be resilient.

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jThis was always the plan - the banks got gifted cheap money by the cecntral banks to go and stuff down the underpants of the unsuspecting so that at a later point those that kept running debt balances could be harvested for higher rates when their balances couldn;t be cleared. Remeber 2003 (ish) 0% interest rate credit cards everywhere - a result of central bank lunatic plicies that were going to end up stuffing someone - either the lenders or the borroers - it ended up as both with the taxpayer bailing out the lenders.

The central banks and their partner regulators / governments are totally reponsible to fermenting this economy destroying casino.

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