Millions of credit card users are facing the highest interest rates in over two decades, despite a general decrease in interest rates across other financial sectors. Recent research by industry experts Moneyfacts reveals that the average annual percentage rate (APR) on credit cards has surged to a staggering 35.8%, the highest level recorded since Moneyfacts began tracking data in June 2006.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, highlighted the significant evolution in credit card usage over the past two decades. While credit cards offer convenience and enhanced security, borrowing costs have escalated. Springall emphasized the importance of making fixed repayments to efficiently clear debts.
These escalating credit card rates contrast with the Bank of England’s base rate of 3.75%, with potential further reductions on the horizon. The disparity means that credit card providers are charging nearly ten times the Bank’s primary rate.
In tandem with the surging interest rates, major UK banks like Barclays have reported substantial profits, with Barclays alone accumulating over £9 billion in profits last year, including a significant portion from credit card operations. According to UK Finance, credit card spending surged to £21.4 billion in November 2025, reflecting a 2.6% increase from the previous year.
Despite the high interest rates, data from UK Finance shows a slight decrease in the percentage of credit card balances accruing interest, indicating that many borrowers are leveraging interest-free offers. Springall pointed out the availability of extended interest-free balance transfer cards, with TSB offering a leading 38-month term at a 3.49% transfer fee.
Chartered wealth manager Philly Ponniah warned about the detrimental impact of growing credit card balances and soaring rates on mortgage applications, labeling it a “toxic mix.” Ponniah cautioned that high credit card debt could hinder borrowing capacity or even derail mortgage applications due to lenders scrutinizing outstanding balances and overall financial health.
Ranald Mitchell, director at Charwin Mortgages, likened high credit card rates to a tax on financial vulnerability, urging caution against making minimum payments. Mitchell underscored how these rates can trap individuals in a cycle of debt, emphasizing the importance of actively managing credit card balances to avoid long-term financial strain.
