Millions of credit card users are facing the highest interest rates in over two decades, despite a general decrease in borrowing costs. Recent data from financial experts Moneyfacts indicates that the average annual percentage rate (APR) on credit cards has soared to a staggering 35.8%, the highest level recorded since June 2006.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, highlighted the significant evolution in credit card usage over the past two decades, emphasizing the increased convenience and safety but also noting the escalating borrowing expenses. She advised borrowers to make fixed repayments to expedite debt repayment.
This surge in credit card rates comes at a time when the Bank of England’s base rate remains at 3.75%, potentially signaling another rate cut in the near future. Consequently, credit card companies are charging nearly ten times the Bank’s primary rate.
Moreover, the spike in credit card interest rates coincides with substantial profits reported by major UK banks like Barclays. In 2025, Barclays, including its Barclaycard division, generated over £9 billion in profits, with £3.4 billion coming from the UK market. Notably, credit card spending reached £21.4 billion in November 2025, reflecting a 2.6% increase compared to the previous year.
According to UK Finance data, 47.8% of credit card balances accrued interest, a slight decline from the previous year, indicating that many borrowers are leveraging interest-free offers. Springall pointed out the availability of extended interest-free balance transfer cards, with TSB leading the market offering a 38-month term with a 3.49% transfer fee.
Philly Ponniah, a chartered wealth manager at Philly Financial, expressed concern over the rising outstanding credit card balances and heightened interest rates, dubbing it a “toxic mix” that could impede mortgage applications. Ponniah emphasized the adverse impact of high card debt on borrowing capacity and cautioned against relying on minimum payments.
Ranald Mitchell, director at Charwin Mortgages, likened high credit card rates to a tax on financial constraints, cautioning against making minimum payments that could lead to prolonged debt cycles. Mitchell emphasized the detrimental impact of interest charges on individuals with already stretched budgets.
Overall, the escalating credit card rates pose challenges for consumers, especially those aiming to secure mortgages, underscoring the importance of managing debt effectively to avoid financial setbacks.
