Credit card rates are creeping upwards, but this may nonetheless be a good thing for consumers, say analysts.
To compare credit cards, the average best rate has risen from 14.90 to 15.04 per cent over the last two months.
The increase means that credit card users are now paying £78.3 million more every year on interest.
But bumping up best rates is also being noted as an honest and transparent answer by the credit card industry to some of their current woes.
With levels of bad debt increasing and more people prepared to compare credit cards and jump to the best rates, losing providers money on balance transfer fees, the industry is facing declining revenue.
Some have turned to opaque and ‘hidden’ credit card fees and ineffectual payment protection insurance in an attempt to part borrowers from more of their money.
“In many ways this might be what the market needs,” credit card consumer advisor Nick White told My Finances.
“If the whole market did this there would be an opportunity for banks to curb underhand practices and ultimately rely less on payment protection insurance sales and ‘hidden charges’,” he added.
The Financial Service Authority, Which?, Citizens Advice and others who compare on credit cards fees have all recently spoken up against payment protection insurance.
Which said it is “expensive, gives limited cover, and can be useless for the self-employed or those on contracts”.
The Association of British Insurers has disputed the claims however. “Payment protection insurance is a valuable product. Insurers and lenders are committed to driving up selling standards,” it claimed.
“We will look closely at the particular concerns highlighted by the FSA, and will discuss these with them, as well as discussing our own improvements.”
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