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Credit cards: UK interest rates almost double US rates

13/11/2008

The average British credit card is charging interest at 17.6% – up from 16.8% a year ago, and almost twice as much as the 9-11% average in the US.

Yet there’s only a two-point difference between the base lending rate of the two countries: in the US, the Federal Reserve’s base rate stands at 1%, while the UK’s Bank of England has set its own base rate at 3%.

As The Guardian reports, Defaqto has blamed government regulation – the Office of Fair Trading’s 2006 decision, for example, to impose a £12 cap on penalty fees – for some of the increase in the cost of credit.

According to Apacs (the UK’s Association for Payment Clearing Services), the average credit card balance is £1,856. This may be the lowest average debt we’ve seen in two years, but Britain’s 30.8 million credit card customers have an average of 2.3 cards each – even though this is down slightly from the 2.4 average in 2003-04.

“Credit card debts can be particularly difficult to clear,” said a spokesperson for Debt Advisers Direct. “Not just because of their high interest rates, but also because of the small minimum payments which many of them require. Many people in debt find they end up paying off a relatively small credit card debt over many years.

“We advise anyone with credit card debts to seek professional debt advice as soon as possible – with the right budgeting strategy, they may find they could clear that debt much faster, saving themselves a lot of money in interest charges.”

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Debt Advisers Direct offer free debt advice and a range of debt solutions, such as debt management plans, debt consolidation loans and IVAs (Individual Voluntary Arrangements).

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