Anyone that has used a credit card that does not offer 0% interest will know that the APR on these cards can be extremely high, and for those that pay their balance gradually rather than in full each month the interest can really pile up.
Since December the Bank of England has reduced the base rate three times by a total of three quarters of a percent, and a great deal of fuss has been made when mortgage lenders have failed to pass on these base rate cuts, leaving borrowers paying over the odds on their mortgages. There has even been a fuss made when unsecured lenders have failed to pass on the base rate cuts on personal loans for new borrowers. However, little has been mentioned about credit card consumers.
In fact, credit card customers have often had a raw deal, as credit card companies have left interest rates very high even though the base rate has fallen considerably over recent months. One official recently stated: “The Bank of England has trimmed interest rates three times since December 2007. But, despite the cuts, interest charges on outstanding credit-card balances remain disgustingly high. "
However, consumers have been urged to remember that credit card interest rates are negotiable and are not set in stone. This means that those with decent credit may be able to get their credit card interest rate reduced, which could save a significant amount of money in interest.
An industry professional said: “The typical Annual Percentage Rate (APR) on popular credit cards is around 16%, which is over three times higher than the Bank of England base rate. Consumers carry about £64 billion of outstanding credit-card debt, of which three-quarters is interest bearing. This means we are forking out £7.7 billion in annual interest payments - around £250 for every credit-card holder a year. "
He added: “But APRs are not set in stone, and are open to negotiations. Every 1% reduction in APRs represents an extra £74 million that go into consumers’ pockets to ease the credit crunch. It is a fraction of the £50 billion bailout that lenders are grabbing from the Central Bank, which is, after all, our money. "
R. Charlton, award-winning writer, shares her financial expertise as a contributing columnist for Credit Card Comparison Online where you can compare credit cards by low interest rate or by best buy 0% purchase credit card deals