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Credit card interest rate

Community Veteran
Posts: 7,924
Thanks: 602
Fixes: 8
Registered: 02-08-2007

Credit card interest rate

Like a number of others I have been sent a load of literature informing me of a range of changes to my credit card terms and conditions which has now gone through the shredder but also inclosed was a booklet and the following caught my attention,

 

If you have a starting balance of £1,000 and you paid the minimum amount each month the interest charged would be £1,263+£1,000 and take 18 years,4 months to clear the balance.

Some people have little option but to use a card to meet everyday expenses so will never be out of debt but at a time when interest rates are so low how can banks justify these high rates of interest ?

4 REPLIES
Community Veteran
Posts: 5,322
Thanks: 467
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Registered: 21-03-2011

Re: Credit card interest rate

It's either rapacious corporate greed, or the cost of insuring against the risk of credit card default.  Given the percentage fees charged to the vendors for credit card transactions, it is probably the former.

 

Now Zen, but a +Net residue.
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Moderator
Posts: 17,253
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Registered: 11-01-2008

Re: Credit card interest rate

Also you’re assuming that credit card interest rates are low because the BoE base rate is low, this isn’t the case.

None of my CC have had rate cuts over the years as the BoE have reduced the base rate, they have remained the same.
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rongtw
Seasoned Hero
Posts: 6,337
Thanks: 1,156
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Registered: 01-12-2010

Re: Credit card interest rate

I dont have any Credit Cards , neither do i want one Thumbs Up

But it dont stop my bank sending me silly offers Sad

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Jonpe
Seasoned Pro
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Registered: 05-09-2016

Re: Credit card interest rate

Unsecured debt is always expensive.  Student loans are similar as a fair number of students won't earn the minimum to trigger repayments.  Interestingly, despite being university educated, students seem unable to understand this, and want the same rates of interest as mortgages, which are - quite literally - safe as houses.