It can be quick and convenient. But credit card borrowing has also become more expensive – in spite of a Bank of England base rate of 0.5%. That’s the picture which emerges from new research by moneysupermarket.com, showing that average interest rates on credit card purchases have risen to 17.32% in July, up from 16.4% in January.
There is comfort for borrowers in the news that so-called 0% deals are being extended, with borrowers benefiting from a longer interest-free period. Yet interest rates which come into force at the end of the period have risen in many cases.
Timing your repayments, then, can be crucial. Experts recommend that borrowers set up a direct debit to make sure that they pay off the minimum amount from credit card balances each month.
But they also point out that those who simply pay off the minimum can find themselves paying down their debts for decades. One financial site warns that on the basis of a not-untypical rate of 17.9% a relatively modest debt of £3000 could take 40 years to clear on a minimum-payment basis.
Downward pressure on interest rates has made mortgage borrowing more affordable than previously, with popular fixed-rate deals attracting record low rates according to Bank of England figures. So it could be worth looking at remortgaging as a route to funding larger purchases, while those faced with high monthly debt repayments may also benefit from lower outgoings.
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