Debt help: Credit card rates hit 12-year high

16/02/2010

Debt help may be needed by Britons as interest rates on credit cards continue to creep up.

The rates are currently at a 12-year high, making credit card debt a looming worry for many.

A report by Moneyfacts looked at the levels of interest during the past 12 years and found that increased competition in the late 1990s lead to a fall in customers' rates.

However, after they hit rock bottom in 2006, the recession turned the tables and figures have slowly crept up with today's average rate hitting a 12-year high of 18.8 per cent.

Michelle Slade, a spokesperson from Moneyfacts, commented: "The UK continues to suffer from a high level of unemployment and providers are worried about the increased risk of customers not repaying their debts.

"This increased risk continues to be passed on to both new and existing credit card customers through higher rates."

Kevin Still, director of debt solutions specialist, EuroDebt confirms the threat of rising rates on family budgets.

"We have consistently warned of the risk of a debt spiral where indebted consumers are having to use their credit cards to pay for household expenditure, like groceries," said Mr Still.

He added: "The staggering increases by some of the credit card providers will mean that interest repayments will represent the majority of the minimum monthly payment, resulting in the balance remaining static. Debt solutions like a Debt Management Plan (DMP) may be applicable in such circumstances."

Posted by Fiona Smith

Tags; Budgeting Advice,

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