Credit card rates hit record high as banks fear customers are overspending

Credit card rates have hit a record high amid soaring inflation which has driven shoppers to borrow to cover living costs.

The average annual percentage rate – or “APR” – charge on credit cards has reached 26.6pc this month, the highest since records began in 2006, according to Moneyfacts, a financial analyst.

May’s average rate represented a jump of 0.4 percentage points compared to February, when the average rate was 26.2pc, and surpassed the previous high of 26.4pc set in October 2021.

Richard Lane of StepChange, a debt charity, said the number of people turning to credit cards is rising as inflation has surged.

“Even with the recent welcome announcement of support from the Government, the cost-of-living squeeze is likely to push more people towards credit to navigate short-term financial pinch points,” he said.

“Even before the cost-of-living crisis, one in three households were struggling to keep up with paying bills and credit commitments, so a rise in credit card APRs, alongside their mounting cost pressures, could see even more households finding it hard to keep their heads above water.”

Jane Tully of the Money Advice Trust, another charity, said: “Our concern is that more people may be forced to turn to credit to cover essentials, like rising energy bills and council tax, which could be storing up problems for the future.”