Millions of credit card users are facing the highest interest rates in over two decades, despite overall interest rate reductions. Recent research by financial experts at Moneyfacts reveals that the average annual percentage rate (APR) on credit cards has soared to 35.8%, the highest since data tracking began in June 2006.
Rachel Springall, a finance specialist at Moneyfactscompare.co.uk, highlighted the significant shift in credit card usage over the past two decades. While credit cards offer convenience and safety, borrowing costs have escalated, requiring borrowers to make fixed repayments to expedite debt clearance.
This surge in credit card rates contrasts with the Bank of England’s base rate of 3.75%, potentially set to decrease further next month. Consequently, credit card providers are currently charging nearly 10 times the Bank’s base rate.
The escalating credit card rates have coincided with substantial profits for major UK banks. For instance, Barclays, including its Barclaycard division, reported profits exceeding £9 billion last year, with a significant portion generated from the UK market. Notably, credit card spending surged to £21.4 billion in November 2025, indicating a 2.6% increase from the previous year, according to UK Finance.
Despite the rise in credit card rates, data shows a slight decrease in the proportion of balances incurring interest. Many borrowers are leveraging interest-free deals to manage their debts effectively. Notably, TSB offers a leading 38-month interest-free balance transfer card with a 3.49% transfer fee.
Experts, including Philly Ponniah, a chartered wealth manager, express concern over the mounting outstanding card balances and increased rates, labeling it a “toxic mix” that could hinder mortgage applications. Rising credit card debt, coupled with record APRs, may restrict borrowing capacity or jeopardize mortgage approvals due to lenders scrutinizing outstanding balances and payment patterns.
Charwin Mortgages’ director, Ranald Mitchell, likened high credit card rates to a financial burden, cautioning against making minimum payments. He emphasized that the 35.8% APR represents an additional financial strain, with minimum payments often trapping individuals in a cycle of debt accumulation and interest charges.
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