Credit card interest rates soar to a 24-year high

Interest rates on credit cards have reached their highest level in almost a quarter of a century — as people turn to plastic to help spread rising costs.

The latest Bank of England data shows quoted interest rates on credit cards reached an average of 21.66 per cent last month, up 0.23 percentage points since June.

This is the highest rate since December 1998, when the average rate was 22.19 per cent.

It follows data from the Office for National Statistics which showed six million people, 13 per cent of the adult population, said they were using more credit than usual because of the cost of living crisis.

Interest rates on some credit cards are at eye-watering levels, with American Express’s gold card set at 61.4 per cent.

Personal loans are also more expensive. The average quoted interest rate for a £10,000 loan grew to a six-year high of 4.18 per cent in July. 

The average rate for a £5,000 loan also climbed by 0.07 percentage points to 8.27 per cent in July.

The analysis was carried out by Freedom Finance, which urged people to shop around when looking at credit products.

Average overdraft rates stalled in July at 35.28 per cent, the same as in June, although this remains an all-time peak.

David Hendry, chief marketing officer at Freedom Finance, says: ‘Consumers should shop around to access the best rates for a card that will suit their situation. This may vary, for example, depending on whether the cardholder pays off the balance in full every month or not.

‘Rewards such as cashback are likely to be a consideration for people who pay off in full, while those who don’t will be more impacted by the interest rate.’