The cost of owing money on a credit card has increased over the past six months as credit card companies look to clampdown on problem borrowers, according to MoneyExpert.com*.
Despite the Bank of England cutting interest rates three times taking them from 5.75 per cent to 5 per cent the credit crunch means borrowers with plastic are being punished.
The independent financial comparison website says the average standard APR on credit card purchases has increased by 0.56 per cent in the past six months from 16.56 per cent to 17.12 per cent.
And the standard rate on a balance transfer is also up by 0.83 per cent from 15.12 per cent to 15.95 per cent, according to MoneyExpert.com.
MoneyExpert.com warns that cash-strapped consumers will have to rely more on their current plastic rather than turn to new deals as lenders get tough in the wake of the credit crunch.
The news comes after MoneyExpert.com revealed that credit card companies had already clawed back some £3.1 billion worth of credit by cutting the spending limits of their customers**.
Sean Gardner of MoneyExpert.com said: "Everyone is finding it more difficult to make ends meet as the cost of living rises. People will want to turn to credit and that means splashing the cash on the plastic."
"Most of us would normally seek out a new zero per cent deal to tide us over the bad times, but with lenders playing a cautious game getting one of those cards is more difficult than it used to be. You’ll need to convince the card company that you can afford to repay your debts."
"This means more of us will have to use our current credit card and if the zero per cent deal has expired you’ll be borrowing money at a rate of around 16 per cent. So be careful what you spend on the plastic because the interest will soon mount up."
A balance of £3,500 on a credit card with a standard APR of 15.95 per cent would incur an annual interest charge of some £558.
MoneyExpert.com offers a unique service which enables people to find the financial products which best meet their specific needs, and which they are more likely to be successful in being accepted for. It includes exclusive research conducted by MORI, which reveals providers’ service levels. This information is married up with a financial database which lists the products suited to the customer. For the first time, people can review a product’s price, features and also the level of service offered by the provider to enable them to make a more informed choice.
MoneyExpert.com aims to demystify the complex world of personal finance, and to help inform customers of the choices available. The service can be found at www.moneyexpert.com
* Average standard APR on purchases, 29.08.07 – 16.56%
Average standard APR on purchases, 09.04.08 – 17.12%
Average standard APR on balance transfers, 29.08.07 – 15.12%
Average standard APR on balance transfers, 09.04.08 – 15.95%
** Online Research carried out by YouGov who interviewed 2,125 GB adults between 31st and 2nd April 2008. The figures have been weighted and are representative of all GB adults (aged 18+).