Credit card providers raising rates
Credit card providers have been raising the amount of interest they charge over the last five months, new research has shown.
Following the Office of Fair Trading's (OFT) ruling in April that credit card companies were charging excessively high fees, most providers have reduced penalty charges by as much as half.
However, these penalty charges accounted for a considerable proportion of credit card firms income, and have been raising interest rates as a result.
Indeed, research from price comparison website moneyfacts.co.uk revealed that 19 credit card companies have raised the rates they charge customers, some by as much as 12.1 per cent.
Lisa Taylor, analyst at comparison service moneyfacts.co.uk, said: "Rising bad debts and the lost fee revenue have left many providers with no choice but to look for alternative avenues for income. And it seems, raising interest rates is a popular option.
"For many consumers this rise may go unnoticed – but should they take the time to look at the long term consequences, they could be in for a nasty surprise."
The website calculated that an individual owing £1,000 on a credit card would be repaying £342.46 at a rate of 8.9 per cent if they were to pay off the minimum each month.
However, should this rate rise to 14.9 per cent then the same debt would not only take three years longer to repay, but would cost £731.69 just in interest.
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