Credit card providers are charging on average 10 times the Bank of England’s base rate as millions of customers are being stung with the highest borrowing costs for at least 20 years
Millions of credit card customers are being stung with the highest borrowing costs for at least 20 years – despite the interest rates elsewhere falling.
Research from industry experts Moneyfacts shows the average annual percentage rate (APR) on a credit card has reached an eye watering 35.8%. It marks the highest since Moneyfacts’ records began in June 2006.
“The past 20 years has seen a significant shift in the use of credit cards,” explained Rachel Springall, finance expert at Moneyfactscompare.co.uk. She warned: “They are much more convenient and arguably safer, but one area that has got worse is the cost to borrow. Borrowers incurring interest need to make fixed repayments to clear debts faster.”
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The rise comes in spite of the Bank of England’s base rate standing at 3.75%, with another fall potentially on the cards next month. It means credit card providers are typically charging almost 10 times the Bank’s main rate.
Higher credit cards rates have coincided with bumper profits from some of Britain’s big banks. Barclays – which owns Barclaycard – raked in more than £9billion worth of profits last year, including £3.4billion from the UK. Credit card spending increased to £21.4 billion in November 2025, a 2.6% rise on the previous year, according to trade body UK Finance.
Its data also revealed that 47.8% of credit card balances incurred interest, down from 48.7% in November 2024, which suggests many borrowers are taking advantage of interest-free deals. Ms Springall said: “Luckily, there are some lengthy interest-free balance transfer cards to choose from, with TSB leading the market with a 38-month term, which charges a transfer fee of 3.49%.
“Making fixed credit card payments is the fastest way to clear debts. Those using a credit card charging 35.8% APR with a debt of £500 would take an entire year to pay it off based on a fixed repayment of £50, and it would cost £85 in interest. Increasing this payment to £100 per month would clear the debt in six months, and halve the interest charged (£42).”
Philly Ponniah, chartered wealth manager and financial coach at Philly Financial, called the growing outstanding card balances and higher rates a “toxic mix” that could “derail” mortgage applications. She said: “Credit card debt is creeping up at exactly the wrong time. Balances rising 8.5% year on year tells us that households are leaning on credit to plug gaps.
“Yes, the share of balances incurring interest has dipped slightly to 47.8%, but that still means nearly half of all card debt is being charged at an average 35.8% APR. That is eye-watering and very hard to outrun. For mortgage hopefuls, this matters. Lenders look at outstanding balances, minimum payments and overall utilisation. High card debt can shrink how much you can borrow or derail an application entirely. Even if you pay on time, heavy usage signals financial strain. Rising balances plus record APRs is a toxic mix.”
Ranald Mitchell, director at Norwich-based Charwin Mortgages, described credit card rates as a tax and warned aspiring homeowners to be wary of making minimum payments. He said: “35.8% APR is a tax on being short of cash. That’s not convenient borrowing, it’s a business model built on people having no slack.
“Credit card firms will say it’s pricing for risk, but when household budgets are already stretched, that risk pricing becomes a squeeze as minimum payments keep people treading water while interest quietly does the damage month after month.”
