Which? shows there’s no link between credit card APR and Bank Interest Rate
Posted May 5th, 2009 and last modified May 7th, 2009
Have you been noticing the official Bank of England interest rate hit 0% a few months ago? Have you noticed your credit card rate is approaching 0% to? Sadly you’ll have notice the former, but the latter seems to be a beautiful lie. Interest rates should follow the trend of rate set by the Bank of England, yet Credit Card rates don’t seem to be dropping.
Research from consumer watchdog organisation Which? has shown consistently that credit card companies are actually increasing their interest rates over the past year. In spite of their protestations to the contrary, the rates are increasing to mitigate the risk of debts not being paid. As credit becomes harder and harder to find, people are often going to struggle to pay off their existing debts, plus with the economy in freefall, job security is extremely low, which again creates greater risk of credit card delinquency.
The bank position on the matter can be summarised by Paul Rodford, the head of policy for the UK Cards association:
“The APR is the total cost of credit and takes into account interest rates, fees and charges. It also reflects the risk of granting an open-ended line of unsecured credit and the possibility of bad debt in an increasingly uncertain economic climate.”
To summarise, Credit Card companies are concerned about greater risk of credit card holder delinquency due to the global economic collapse. To mitigate this risk, they are increasing the cost of credit through fees & interest rate changes.
While this is probably sensible business practice from the credit card company’s perspective, it does leave the consumer high and dry.
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Comparison of Top 10 Credit Card Offers
| Credit Card | Card Details | Interest Rate | Cash Advance Rate | Balance Transfer Rate | Annual fee | Interest free days | ||
|---|---|---|---|---|---|---|---|---|
 Halifax All in One Credit Card |
The Halifax All in One credit card offers a great introductory rate, and is perfect for saving you money now as well as in the future. | 15.9% APR | 27.95% p.a. (variable) | 0% for 9 months | No Annual Fee | 59 Days interest free |
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 Virgin Credit Card |
As well as a great rate, the Virgin Credit Card comes with:
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16.6% APR (variable) | 27.9% p.a. (variable) | 0% for 16 Months (2.98% fee on balance transfers) | No Annual Fee | 50 days on card purchases |
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 Capital One Classic Visa |
This card is designed for people with bad credit ratings, this is why the rate is quite high. |
Typical 34.9% APR variable | 34.9% APR | 34.9% APR | No Annual Fee | 56 days for purchases. 0 days for balance transfers and cash. |
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As well as earning Flying Club miles which you can spend on brilliant rewards like flights, upgrades, car hire and more, a Virgin Atlantic Credit Card gives you up to 46 days interest free on card purchases. |
17.9% APR typical rate | 20.9% p.a. (variable) | 0% for 6 months (2% handling fee) | No Annual Fee | Up to 46 days on card purchases only. |
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The Virgin Prepaid MasterCard from Virgin Money is a prepaid Mastercard that you can add funds to, and use these funds for normal purchases. |
N/A | N/A | N/A | N/A | N/A |
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5% cashback on purchases in your first three months (up to £4,000 of spend). Thereafter, earn 0.5% on the first £3,500, 1% on £3,501 to £10,000, and 1.5% after £10,001. |
18.9% p.a. | 27.9% p.a. | 18.9% p.a | No Annual Fee | 56 days for purchases. 0 days for balance transfers and cash. |
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Vanquis Visa Card is designed for people with no credit history or who have previously had bad debt. Representative 39.9% APR (variable) |
Representative 39.9% APR (variable) | 39.9% | N/A | No Annual Fee | Up to 56 days on card purchases only |
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The award winning prepaid card with no credit check or bank account needed. | Funds in your Account will not earn interest | Prepaid only - N/A | Prepaid only - N/A | £59.40 p.a. (£4.95/month) | Prepaid only - N/A |
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