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Towards the end of 2012, the average purchase rate on credit cards had risen as high as 19.1 per cent – up an entire per cent from the same period one year previously. In fact, 19.1% is the highest the APR on credit cards has been in 18 months in the UK.
The increasing APR is perhaps a little surprising, given the vast array of deals available on the market when it comes to 0% balance transfers. The worry is that because large numbers of consumers are taking advantage of these deals, the companies providing them are pushing up their interest rates in order to continue to make money.
Will Becker, Chief Executive of credit card comparison site Totally Money commented: “The best current credit card offers are record breaking, yet average interest rates have crept up. The gap between those using and switching their card wisely and those staying with their existing offer is growing as a result. The majority are carrying an interest balance and switching it to the best deal – an amazing 24 months 0% from Barclaycard, would save well over £500. Equally, the average household could be making over £300 in rewards or cash back if they moved their spending to the right credit card. There’s so much money to be made now choosing and using your credit card, it’s our number one personal finance tip.”
It’s more vital than ever to shop around before taking out a credit card; whether that means going into your local high street banks; checking providers’ websites; or visiting a comparison site; there is a lot of small print to sift through, and there will be different advantages to each credit card for different types of user.
Providers are now allowing consumers to repay less of their credit card debt per month than ever before, which means that they can keep collecting interest on that debt for much longer, and keep that debt on their books.
It’s important to remember that paying less interest on your credit card is not impossible, and the fact that there are good deals out there means that spending on credit cards still has many advantages when the plastic is employed properly.