Credit card charges have risen over the last two years and borrowers are now paying a high price for spending on plastic. However it is not all bad news, if you are willing to shop around there are still some good deals available.
According to Moneyfacts.co.uk the average credit card purchase rate has risen by 1.5% over the last two years, from 14.9% to 16.4%. If you pay your bill in full each month this will not affect you. But for those making minimum repayments the cost is high. “Anyone with a balance of £5,000 repaying just 2.5% per month will end up paying an additional £755 in interest,” explains Michelle Slade, Analyst at Moneyfacts.co.uk.
“The average interest rate for cash transactions has also risen from 18.1% to 24.3%. On top of this the majority of institutions have increased their cash advance charges,” says Michelle Slade. “Previously the majority of institutions charged 2%, minimum £2. Now the majority charge 3%, minimum £3. Taking cash out on credit cards has always been an expensive way of borrowing, particularly as interest is charged from day one, but with the 6.2% increase in the average rate customers who are relying on cash advances to balance their monthly budget it will make a bad situation even worse.”
But she says it is not all doom and gloom. The number and length of introductory deals available has increased. In April 2006 there were 58 cards offering 0% introductory purchase deals of up to 10 months. Today there are 85 cards with deals of up to 12 months. The number of lenders offering 0% balance transfer deals has also risen from 82 in April 2006, to 99 today.
"Although rates and charges on credit cards have increased, there are still good deals to be found for those with a good credit history,” says Michelle Slade. Shop around and find a card that best suits your needs, whether it's a balance transfer deal if you have an existing debt on a card, or a card with an incentive such as cashback if you pay your balance off in full."
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