With credit card interest rates at new highs, campaigners want there to be more caps on the rates, The Guardian writes.
The rates are reportedly the highest they’ve been in twenty years.
The Bank of England reports that the average annual interest rate is now 21.49% as opposed to the base rate of 0.1% — which is the highest average rate since December 1998.
According to Michael Donald, an ex-director of Visa U.K. and founder of ImageNPay, a U.K. digital payment app, the financial industry would have a difficult time justifying the high interest rates due to the low base rate.
He said consumers should look at whether they need to have debt on a credit card when personal loans can be obtained with interest rates of around 2.8%, and with numerous payment options. He wondered if it was time to get rid of the credit card altogether.
The last time interest rates were this high was October 2001, the report says — interest rates sat at 18.1% while the base rate was 4.5%, 45 times higher than it is now.
In the U.K., consumers owe around £57.9 billion on credit cards, which comes out to around £2,080 per household, as data from the Bank of England says.
Poorer U.K. residents have resorted to credit cards to pay for living costs, charities say — some research by the Joseph Rowntree Foundation says there were 4.4 million low-income households having to take on more borrowing since the pandemic hit.
That said, wealthier households had more chances to save because of the lockdown. According to The Guardian, around £14 billion of credit card debt was paid off since February 2020.
A U.K. lawmaker, Stella Creasy, says even Buy Now, Pay Later, which has grown popular as a way to afford things in the times of economic strife, needs to be regulated.
She said the speed at which the BNPL industry has evolved could spell trouble if people get into too much debt.