The rates are reportedly the highest they’ve been in twenty years.
The Bank of England reports that the average annual interest rate is now 21.49% as opposed to the base rate of 0.1% — which is the highest average rate since December 1998.
According to Michael Donald, an ex-director of Visa U.K. and founder of ImageNPay, a U.K. digital payment app, the financial industry would have a difficult time justifying the high interest rates due to the low base rate.
He said consumers should look at whether they need to have debt on a credit card when personal loans can be obtained with interest rates of around 2.8%, and with numerous payment options. He wondered if it was time to get rid of the credit card altogether.
The last time interest rates were this high was October 2001, the report says — interest rates sat at 18.1% while the base rate was 4.5%, 45 times higher than it is now.
In the U.K., consumers owe around £57.9 billion on credit cards, which comes out to around £2,080 per household, as data from the Bank of England says.
Poorer U.K. residents have resorted to credit cards to pay for living costs, charities say — some research by the Joseph Rowntree Foundation says there were 4.4 million low-income households having to take on more borrowing since the pandemic hit.
