Credit card companies have increased their interest rates to compensate for revenue they have lost as a result of lower default charges and rising bad debt, according to new research.
Moneyfacts claims that 19 credit card firms have raised their interest rates in the past three months, with one provider raising its rate of borrowing by over 12 per cent.
Users of Barclaycard’s Simplicity platinum card must now pay an additional 12.1 per cent interest on cash withdrawals, resulting in a total charge of 27.9 per cent, while American Express has imposed a six per cent increase to 14.9 per cent on purchases made by customers using its platinum Amex card.
The company claims that the interest rate hikes instigated by the companies and other credit card providers result from a recent Office of Fair Trading (OFT) ruling ordering lenders to lower default charges to less than £12 for customers failing to make their monthly payments.
“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,” explained Moneyfacts analyst Lisa Taylor.
“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,” she added.
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