Millions of credit card users are facing the highest interest rates in over two decades, despite general interest rate decreases. According to Moneyfacts, the average annual percentage rate (APR) on credit cards has surged to 35.8%, the highest since the firm began tracking data in June 2006.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, highlighted the shift in credit card usage over the past 20 years, emphasizing the increased cost of borrowing. She advised borrowers to make fixed repayments to expedite debt clearance.
This spike in credit card rates contrasts with the Bank of England’s base rate of 3.75%, hinting at potential further reductions. In comparison, credit card companies are charging nearly ten times the Bank’s primary rate.
Despite these high rates, major UK banks like Barclays have reported substantial profits. Barclays, including its Barclaycard division, generated over £9 billion in profits last year, with a significant portion coming from the UK. Credit card spending also saw a 2.6% increase to £21.4 billion in November 2025, as per UK Finance data.
While 47.8% of credit card balances incurred interest, down from the previous year, many users are opting for interest-free deals. Springall mentioned the availability of long interest-free balance transfer cards, with TSB offering a 38-month term.
Chartered wealth manager Philly Ponniah warned of the detrimental impact of rising card balances and escalating rates on mortgage applications. She emphasized that high card debt could limit borrowing capacity or jeopardize mortgage approvals due to lenders’ scrutiny of outstanding balances and payment history.
Director Ranald Mitchell from Charwin Mortgages likened high credit card rates to a financial burden and cautioned against making only minimum payments. He criticized the business model of charging 35.8% APR, stating that it primarily targets individuals with limited financial flexibility.
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