UK Money News
16th April 2008
Card borrowers hit by higher APRs
The Office of Fair Trading's (OFT) decision to cap default charges on credit cards has backfired, new data suggests.
In 2006 fees were capped at £12 following pressure on credit card providers from the OFT.
However, in order to compensate for the consequent shortfall in income, lenders have simply raised the average purchase rate on their products.
This has resulted in the APR charged on cards to increase from 14.9 per cent to 16.4 per cent.
Meanwhile, the average rate charged has risen to 24.3 per cent, compared with 18.1 per cent in April 2006.
Michelle Slade of Moneyfacts said: "Taking cash out on credit cards has always been an expensive way of borrowing, particularly as interest is charged from day one.
"But with the 6.2 per cent increase in the average rate for customers who are relying on cash advances to balance their monthly budget, it will make a bad situation even worse."
Prior to the introduction of the cap, the average fee for defaulting on a credit card was £22.50.
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