Credit card rates are at a record high, making it more important than ever to pay off what you owe as soon as possible to avoid interest charges racking up.

Even though the Bank of England base rate is at 4%, figures from Moneyfacts show credit card rates are now 30.3%, on average. This is the highest rate recorded since Moneyfacts first started tracking average rates in 2006.

If you’ve read the headlines recently, you’ll know that borrowing on credit cards has soared recently, with many people turning to cards to help them make ends meet during the cost of living crisis. According to latest Bank of England data, credit card borrowing soared to £1.2 billion in November, up from £400m in October. 

If you’re turning to your credit card more than usual, and your provider has recently hiked the interest you’re being charged, what, if anything, can you do about it?

If your rates go up

Credit card companies have a fair amount of freedom about when they raise rates and how much by, although the rules stop them from raising them within the first 12 months of you taking out your card and they can’t raise your rates more than once every six months after that. They also can’t raise your rates if you’re obviously struggling, for example, if you’ve been to a debt advice charity for help or if you’ve not been able to make two minimum payments. 

Your card company has to give you 30 days’ notice if your interest rate is increasing and it must tell you why it’s raising your rates if you ask. It should offer you an alternative product at a lower rate if there’s one available. 

Your provider should also give you the option of closing your account. You have to opt into this, but the benefit of doing so is that you can pay off your debt at the existing interest rate (i.e. before the rate rise). 

Card companies have to give you a ‘reasonable time’ in which to pay off your debt. With most card companies, as long as you’re making the minimum payments you should be able to repay at the old interest rate (but paying the minimum is not recommended as depending on the size of your balance it could take you years to repay what you owe).

If your limit is increased or reduced

After years of increasing card limits without being asked, many card companies now reduce limits for existing cardholders. Card providers say it’s normally done when customers seem in danger of not being able to manage existing limits, although critics accuse card companies of ditching unprofitable customers.

If your credit limit suddenly reduces, you can ask the card company why they’ve reduced your credit limit, but there’s no guarantee you’ll be able to persuade them to change their mind to change it back if you feel you need a higher limit.

Paying off your credit card

If you’re worried about high credit card rates and want to pay off your credit card debt, you may want to consider moving your balance across to a balance transfer card. These usually offer lengthy 0% introductory rates, giving you the opportunity to reduce your balance without interest rolling up. 

Unfortunately, according to research by financial website, over the past few months, interest-free terms on balance transfer cards have reduced, giving borrowers less time to pay back what they owe before interest starts being charged.

A spokesman for said: “Those looking to take out a 0% introductory balance transfer card will be disappointed that the cost to move their debts is rising. The average introductory interest-free balance transfer term of 577 days is at its lowest since December 2021, so despite these offers being typically sought after at this time of year, credit card providers have tightened the terms they are prepared to offer.”

Despite this, there are still several competitive balance transfer cards to choose from, including NatWest’s Longer Balance Transfer card, which offers a 0% introductory rate for 30 months, and 

M&S Bank’s Transfer Plus card, which has a 0% rate for 28 months. Both these cards have a 2.99% balance transfer fee. Make sure you can pay off what you owe within the introductory period as when they finish, both of these cards charge a 23.9% annual percentage rate (APR).

If you have several credit cards with large balances on them, then alternatively you may want to consider consolidating them into a low cost loan. You can find out more about both balance transfer cards and personal loans in our guide Balance transfer credit cards and personal loans compared.

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