Credit card customers are facing the highest borrowing costs in over two decades, despite falling interest rates in other sectors. Recent research by Moneyfacts reveals that the average annual percentage rate (APR) on credit cards has soared to 35.8%, the highest level since Moneyfacts began keeping records in June 2006.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, noted a significant shift in credit card usage over the past 20 years, emphasizing the increased convenience and safety but also highlighting the escalating borrowing costs. She advised borrowers to make fixed repayments to expedite debt clearance.
This surge in credit card rates contrasts with the Bank of England’s base rate of 3.75%, potentially set for a further decrease. Consequently, credit card providers are charging nearly ten times the Bank’s main rate.
Despite these high rates, British banks like Barclays, which owns Barclaycard, reported substantial profits in the previous year. Credit card spending also rose to £21.4 billion in November 2025, a 2.6% increase from the previous year, according to UK Finance.
Furthermore, data from UK Finance indicated that 47.8% of credit card balances accrued interest, showing a slight decrease from the previous year. This trend suggests that many borrowers are leveraging interest-free deals. Springall highlighted the availability of lengthy interest-free balance transfer cards, with TSB leading the market with a 38-month term and a 3.49% transfer fee.
Financial experts have raised concerns about the growing outstanding card balances and elevated rates, warning of potential implications on mortgage applications. Philly Ponniah from Philly Financial described the situation as a “toxic mix” that could hinder mortgage approvals, emphasizing the impact of high credit card debt on borrowing capacity and financial stability.
Ranald Mitchell, director at Charwin Mortgages, criticized credit card rates as a burden on cash-strapped individuals, cautioning against making minimum payments that can prolong debt repayment and financial strain.
As credit card rates continue to climb, borrowers are urged to manage their debts prudently to avoid long-term financial repercussions and safeguard their financial well-being.