Average card rates have risen by 4.75% in the last 10 years

New TotallyMoney research has highlighted the rise of credit and debit card interest rates, and found that over the past 10 years, the Bank of England base rate increased by 4.75 percentage points, yet the average card rate has rose by 6.9 percentage points with one lender hiking theirs by 11 percentage points and that high street lenders are now charging 18.90%-27.90% APR.

Between 2014-2022, the base rate increased by just 0.25 percentage points, but big banks hiked rates by an average 2.6 percentage points, with two increasing by 5%. 51% of customers pay interest on more than £32bn of debt every month.

Lenders were increasing APR’s long before the Bank of England started hiking the base rate in December 2021. Average rates for some of the biggest high street lenders rose from 17.90% in 2014, to 18.30% in 2017, and 19.40% in 2019. Since then, it’s increased by an additional 3%.

Alastair Douglas, CEO of TotallyMoney said “Long before the recent series of base rate hikes from the Bank of England, APR’s were slowly rising, with lenders now charging customers up to 11 percentage points more interest on their credit card borrowing than a decade ago.

“Even since last summer, when the base rate was last increased, APR’s have risen by another 0.77 percentage points — and more than half of customers are now paying interest on their monthly statement.

“Paying interest is not just costly, but can also cause financial distress. However, the good news is that it can be avoided with a balance transfer. If eligible, you could press pause on interest payments until August 2026, allowing you to pay off the debt quicker, cover other expenses, or save for a rainy day. The best card available currently gives you 28 interest free months, and you could save £1,353 on the average balance.

“Always look for offers which give you pre-approval, and guarantee the interest rate, limit, and duration. That way you’ll know if you’ll be accepted before you apply, and that what you see is exactly what you’ll get.”

Andrew Hagger, Personal Finance Expert from Moneycomms.co.uk  said “The interest rate charged on credit card purchases has ratcheted up throughout the last decade, but the potential additional cost burden has really taken off in the last couple of years.”

“If you’re a customer who pays in full each month then the interest rate is irrelevant but for huge swathes of the population struggling with a cost-of-living squeeze and only making partial payments each month, the financial impact is far greater”

The table below highlights the steady rise of interest rates over the past ten years, even during a period when the base rate stayed relatively flat. Over the past ten years, Metro Bank has consistently offered lower rates, and is currently charging 18.9% when the average high street lender sets theirs around 24.8%. The NewDay branded John Lewis Partnership Card (27.90%), and Sainsbury’s Bank card (26.90%) charge some of the highest rates.

The steady rise of interest rates over the past ten years: