Credit card rates set to rise as write-offs soar

If you are wondering why you pay such a high interest charge on your credit card look no further than the latest debt figures from the Bank of England.  

UK banks and building societies wrote off a record £10.9 billion of loans to individuals in the last 12 months to the end of June 2010. This happens when defaulting borrowers are unable to repay their debts. In the second quarter of 2010 they wrote off £3.47 billion - of which £2.14 billion was credit card debt.

Last year was a record too for credit card write offs which totalled £4.1 billion - about 10% of all the money lent on credit cards. That total looks likely to be exceeded by a very wide margin this year.  The upshot will be even higher interest charges and penalties on credit cards. So if you use the credit facility on your card, now is the time to shop around for a lower interest rate.

The current best buy is the Barclaycard Platinum Simplicity VISA with an interest charge of just 6.8% for purchases and15.8% for cash withdrawals.  Close behind is Halifax’s Easy Rate Mastercard charging 6.9% on purchases – but a hefty 27.9% for cash withdrawals.  Neither card has any concessionary 0% purchase or balance transfer options. 

If you want a reasonable interest rate and a concessionary deal on purchases, the best bet is Sainsbury’s Finance Mastercard (for Nectar Card holders) which offers 0% on purchases for 12 months and thereafter 15.9% on purchases and 24.9% on cash withdrawals.   You also qualify for 0% on balance transfers for 12 months too for a fee of 3% of the amount transferred.  Tesco’s Clubcard Mastercard is very similar with 13 months interest free on purchases and thereafter 16.9% or 24.9% for cash.  You also get 0% on balance transfer for nine months too for a fee of 2.9% of the amount transferred.  Which you choose will depend on where you prefer to shop.