Credit card costs soar by 23% as credit crunch bites

CONSUMERS are paying the price for the so-called credit crunch as credit card companies jack up their interest rates as high as 22.9%.

Half of the 16 top credit cards on the market are more expensive than they were a year ago, even though basic bank interest rates have only risen from 3.5% to 4% in that time.

Banks across the world are increasing the cost of their loans, mortgages and credit cards as a result of widespread financial losses after they lent money to US homebuyers who did not pay the money back.

Among the banks hiking the costs is AIB, which has raised the interest rate for cash withdrawals on its platinum card from 12.76% to 22.9% New applicants have to earn a minimum of €50,000 — to ensure they can pay their bills — but a year ago the bank, like many others, had no salary requirements.

By comparing the cost of credit cards a year ago with the costs today the Irish Examiner has established eight cards are dearer, six are the same while two are cheaper.

Last night, the Consumers’ Association of Ireland (CAI) said consumers had to act quickly and find a better deal if they did not want to pay swingeing interest rates.

“People stay with their credit card company, but they don’t know how easy it is to switch to a new one even if they still have a balance to pay off,” said CAI chief Dermott Jewell.

“Consumers fail to understand they can save money by switching. Banks are getting away with quite a lot as a result. Consumers could also be unaware of the increases in interest rates as banks have not been shouting about it at all.”

He said borrowers who paid off the minimum amount every month also needed to act as they will see their debt grow larger as a result of hikes.

The Bank of Ireland, which operates American Express in Ireland, has increased interest rates to 19.1% on purchases and to 20.2% on cash withdrawals. The rises maintain the American Express card’s position as the costliest on the market.

MBNA has increased to 19.9% the interest on cash withdrawals on its own cards as well as two it issues under the One Direct name.

Previously these were 15.7% to 18.7%. Among other changes is GE Money’s decision to scrap its 0% interest deal for six months on balance transfers on the Debenhams Mastercard and instead charge 2.9%.

AIB’s credit cards now have a €7-a-time penalty for consumers who exceed their credit limit or who pay their bills late. Previously such fees were as low as €2.54, but the hike represents an increase of 176%.

First Active and Ulster Bank are the only two banks to have reduced the cost of borrowing on their cards.

Their rates for purchases are now 12.9% and 16.5% respectively, while the interest on cash withdrawals is 20.1% and 20.7%, but neither lender has the lowest rates on the market.

AIB’s ‘Click’ card, as well as Halifax and Permanent TSB’s offerings, have interest rates ranging from 8.5% to 9.9% on purchases.

www.itsyourmoney.ie


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