Banks reap huge 2006 profits through credit cards rates

08/01/2007

Industry information suggests that around an additional £1bn a year is earned by banks from the rates that are charged in credit cards. There are around 69 million UK credit holders.

According to statistics less than 60 per cent of credit card holders make full payment on their credit card. The knock on effect of these actions results in the mounting of debt due to interest charges.

To add to the above situation should banks could earn an additional £240 million through increase of their interest charges by an increment of 1 per cent to 16.9 per cent for example. Actions such as these could create an even unstable debt situation in the market and amongst those who have difficulties with payments at the moment.

Interest rate hikes across lenders has been influenced by a number of factors such as their increased level of consumer debt.

Consumers should be particular with regards interest rates but the more importantly associated charges for making purchases and cash withdrawals. It is known for some withdrawal charges to be around the 22.9% region.