There was an interest rate cut last week. You would think that this would be a bonus for most of us.
Not if you have a credit card it isn’t…
That is because banks have actually increased the interest rate on tens of millions of debit and credit card holders despite the cost of borrowing falling to a 50-year low.
This has seen the average annual percentage rate (APR) for credit cards rise from 17.2% to 17.6% since May.
The higher rates will affect many of us in the run-up to Christmas, as we attempt to defer the cost of present buying by turning to the fantastic plastic.
The NatWest credit card has risen from 13.9% to 16.9%, while HSBC's credit card and the Virgin Money Mastercard have both climbed 1% to the same mark.
Apacs, the payment association that represents credit card providers, said banks did not set card rates according to the Bank of England's base rate. An Apacs spokesman said: 'Whilst the interest rate is considered when rates are set, you must also factor in the cost borne in providing the service.'
David Black of Defaqto said that credit card companies were probably attempting to recoup the cost of bad debts, rising levels of fraud and customers making use of 0% balance transfer discounts.
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Store cards have been branded the worst offenders as some are now charging up to 25% interest.
High Street chain shops Principles, Karen Millen and Oasis have been highlighted in a new study by Defaqto for raising its charges even higher to 28.9%.
The study also showed that between May and November this year, the average interest rate on 240 credit cards increased by 0.4%.
Last year the Competition Commission ruled that store card APRs were too high. Now providers that charge more than 25% must point out on monthly statements that cheaper credit may be available elsewhere.
In addition, millions of you with Halifax credit cards might could end up paying extra interest charges after being told you don’t need to pay off as much each month.
Last week Halifax changed its terms and conditions to reduce it’s minimum monthly repayments on a credit card bill from 2% to 1%.
This means if you have an average balance of £1,384, you will end up paying £3.23 more interest in the first year under the new minimum repayment terms; this increases to £51.39 on a balance of £10,000, according to the comparison firm Uswitch.
However if your interest charges, insurance premiums and late payment charges, plus £5 is greater than the 1% minimum payment you will then have to pay the higher amount. It means that only those of you with bigger balances will be able to pay the new 1% minimum rate.
Halifax claims the changes will make it easier for those of you with big interest payments to tackle your bills. It says the majority of you will still repay an average of 2% each month.
Simeon Linstead of Uswitch said: “Making the minimum repayment 1% may seem like a good idea at the time, but it will barely touch the balance and could lead to a very long debt sentence.”
It would be great news if the interest rate cut was applied to our credit cards wouldn't it? But this appears very unlikely ,especially as lenders have actually increased the rates on our cards!