The base rate cut failed to benefit credit card customers
June 5, 2008
There have been three base rate cuts over recent months, with the Bank of England cutting the base arte by 0.75% between December 2007 and April 2008. Despite these rate cuts not all lenders have passed on the cuts to borrowers, and there has been a lot of controversy over lenders that have failed to pass on the base rate cuts to mortgage and loan customers, with many claiming that the lenders in question are adding to the slowing economy by leaving borrowers to struggle despite the base rate cuts.
However, little has been said about credit card customers, who have also had to pay over the odds on interest in many cases. Whilst the base rate has been going down credit card providers have continued to hike up rates, fees, and charges, which means that many consumers have failed to benefit.
One industry official said: “The Bank of England has trimmed interest rates three times since December 2007. But, despite the cuts, interest charges on outstanding credit card balances remain disgustingly high.”
He added that credit card customers are paying out billions in interest payments, with the average interest rate four times that of the base rate. He said: “The typical annual percentage rate on popular credit cards is around 16 per cent, which is over three times higher than the Bank of England base rate. This means we are forking out £7.7 billion in annual interest payments - around £250 for every credit card holder a year.”
He concluded: “APRs are not set in stone, and are open to negotiations. Every one per cent reduction in APRs represents an extra £74 million that go into consumers’ pockets to ease the credit crunch. It is a fraction of the £50 billion bailout that lenders are grabbing from the Central Bank, which is, after all, our money. Fool.co.uk therefore urges card holders to ask their providers for a reduction in interest rates. Banks may want their cake and eat it, but we deserve a slice too, since we are paying for it.”
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