Millions of credit card users are facing record-high interest rates, despite overall rate decreases in the market. Recent data from Moneyfacts, a financial research firm, reveals that the average Annual Percentage Rate (APR) on credit cards has surged to 35.8%, the highest level since Moneyfacts began tracking in June 2006.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, noted a significant shift in credit card usage over the past two decades. While credit cards offer convenience and security, the cost of borrowing has worsened. Springall emphasized the importance of fixed repayments for borrowers looking to clear debts efficiently.
This spike in credit card rates contrasts with the Bank of England’s base rate at 3.75%, hinting at a potential rate cut in the near future. Credit card providers are currently imposing rates nearly ten times higher than the Bank’s base rate.
Despite the higher interest rates, major UK banks like Barclays, which includes Barclaycard, have reported substantial profits. In November 2025, credit card spending reached £21.4 billion, a 2.6% increase from the previous year, according to UK Finance data.
While 47.8% of credit card balances accrued interest, down from 48.7% in the prior year, many consumers are leveraging interest-free deals. Springall highlighted the availability of lengthy interest-free balance transfer cards, with TSB offering a leading 38-month term at a 3.49% transfer fee.
Chartered wealth manager Philly Ponniah expressed concern over the mounting credit card balances and soaring rates, labeling it a “toxic mix” that could hinder mortgage applications. Ponniah emphasized the impact of high card debt on borrowing capacity and application approvals, cautioning against relying on minimum payments.
Ranald Mitchell, director at Charwin Mortgages, criticized credit card rates as a burden on financially strained individuals, emphasizing the long-term damage caused by high APRs and minimum payments. Mitchell warned against the pitfalls of minimum payments, highlighting the cycle of interest accumulation for those with tight budgets.