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June 10, 2011

  • News:  UK Base Rate Low; Card Rates High 

    United Kingdom's central bank froze its base interest rate at the lowest it's been history. Critics are saying that despite the Bank of England's record low interest rate, credit card companies are charging its cardholders record high interest rates. While the average credit card interest rate hit a four year high of approximately 18.7 percent despite the all time low of 0.5 percent base rate. In 2007, the Bank of England's base rate was 5.75 percent and the average credit card interest rate was 16.6 percent. So, while the base rate only edged up by less than a percent, card interest rates have skyrocketed by more than 2 percent over the past three years.

    Analysts and consumer advocates have voiced their concerns. Eddy Weatherill, of the Independent Banking Advisory Service has likened the credit card companies' actions to "profiteering". Weatherill said that banks and card companies are only looking out for themselves as they seek out ways to generate income and raise profits. David Black, of Defaqto, noted that because lenders have become more particular about who they issue a credit card to, those individuals that are approved are having to pay a significantly higher interest rate.

    Defending the banking industry, a member of the British Bankers Association said that because of a decaying economy, increased credit card defaults and rising costs resulting from new regulatory rules lenders have been forced to change the standards by which they issue credit. In doing so, they have become more cautious with who they issue a card account. The spokesperson noted that banks offer many appealing and beneficial card deals and those creditworthy individuals can choose from such deals as zero percent interest for 56 days. It was also noted that interest rates fluctuate depending on the individuals credit history and those with better credit histories earn a better interest rate.

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