Millions of credit card users are facing the highest interest rates in over two decades, despite a general decline in interest rates. Research conducted by financial experts at Moneyfacts reveals that the average annual percentage rate (APR) on credit cards has soared to a staggering 35.8%, the highest since Moneyfacts started recording data in 2006.
According to Rachel Springall, a finance expert at Moneyfactscompare.co.uk, credit card usage has evolved significantly over the past 20 years, becoming more convenient and safer. However, one downside is the increasing cost of borrowing. Springall emphasizes the importance of making fixed repayments to clear debts efficiently for those incurring interest charges.
This surge in credit card rates contrasts with the Bank of England’s base rate of 3.75%, potentially set for further decreases. Credit card providers are currently charging nearly 10 times more than the Bank’s main rate.
The spike in credit card rates coincides with substantial profits reported by major UK banks. Barclays, including its Barclaycard division, recorded profits exceeding £9 billion last year, with a substantial portion coming from the UK. In November 2025, credit card spending reached £21.4 billion, a 2.6% increase from the previous year, as reported by UK Finance.
Despite the high rates, data from UK Finance indicates a slight decrease in the percentage of credit card balances incurring interest, signaling that many borrowers are leveraging interest-free offers. Springall highlights the availability of lengthy interest-free balance transfer cards, with TSB leading the market with a 38-month term and a 3.49% transfer fee.
Philly Ponniah, a chartered wealth manager at Philly Financial, warns about the detrimental impact of growing outstanding card balances and higher rates on mortgage applications. She stresses that high credit card debt, with an average APR of 35.8%, can hinder borrowing capacity and financial stability.
Ranald Mitchell, director at Charwin Mortgages, describes credit card rates as a financial burden and cautions against making minimum payments. He emphasizes that the high APRs impose a significant strain on households already facing budget constraints, turning minimum payments into a perpetual cycle of debt accumulation.
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