Card providers clawing back losses after OFT ruling
27/09/2006
Since the Office of Fair Trading (OFT) ruled that credit card providers must limit default fees to £12, many companies have increased their basic interest rates to recoup the losses they will incur.
According to research from Moneyfacts.co.uk, 19 providers have increased their rates, and some by up to 12.1 per cent.
"While it may be argued that the 0.25 per cent increase to base rate in August resulted in some of these increases, with rises of up to 12.1 per cent it is clear other forces are at play," said Moneyfacts' Lisa Taylor.
"Rising bad debts and the lost fee revenue has left many providers with no choice but to look for alternative avenues for income and it seems raising interest rates is a popular option.
"For many consumers this rise may go unnoticed but should they take the time to look at the long term consequences, they could be in for a nasty surprise."
Ms Taylor noted that even a six per cent rise in interest charges could extend the payment term of a £1,000 debt by almost three years, proving that even relatively small alterations could have large consequences.
To read more on credit cards with the lowest rate of interest, click here.
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