Credit card firms across the UK have been accused of making unfair profits from customers after the cost of borrowing on a credit card hit a four-year high.
With the Bank of England base rate still at it’s 0.5% record low, the same level for almost two years, one would assume that the cost of borrowing on a credit card should be at a similar low level.
Figures released yesterday suggested the opposite, with the average credit card rate now a massive 18.7%.
In 2007 the Bank of England base rate was 5.75% and at the same time the cost of borrowing on a credit card was only 16.6%.
The huge increase in profits made by the credit card companies, despite the fall in their costs has caused several experts to accuse the credit card companies of profiteering.
Independent Banking Advisory Expert, Eddy Weatherill explained, “It is profiteering and always has been. They are trying to boost their profits for as long as possible and we’re all being made to pay for it. It’s heads they win, tails we lose. There is no justification for it.”
Over the last few years credit card providers have become more selective over who they lend money too, and will lend to those with a better credit rating at a lower rate, and those with a worse credit rating will be offered a higher rate, if a card at all.
Bavid Black, a banking analyst from Defaqto explained, “Credit cards have become much harder for people to obtain over the last few years and, at the same time, we have seen a significant increase in standard interest rates that they charge.” The figures were compiled by the financial information firm.
The British Bankers Association released a statement saying, “Banks’ costs have increased due to the economic situation and increased regulatory costs, such as the requirement to hold more capital.
“Banks continue to compete for customers and a wide range of deals are available. And customers with credit cards can benefit from up to 56 days free credit if they repay the balance in full by the stated date.”