"Possibility of bad debt" can raise credit card rates

6 May 2009

Sometimes, charges on credit cards have to be raised because of the risk of bad debt, says a spokesperson for the credit card industry, as MoneyExpert.com reports.

Speaking in response to the recent Which? report (which branded credit card firms as `out of touch` with consumers` needs), Paul Rodford, head of policy at the UK Cards Association, pointed out that charges sometimes need to be raised because of the "possibility of bad debt" - and that this is particularly relevant in a recession.

The Which? report raised the issue that most credit card firms had increased their rates over the past year.

Mr Rodford responded that the average interest rate on a credit card was "well beneath" the 22.9% peak seen in 1995.

He also pointed out that 60% of customers pay off their monthly balances in full.

"A credit card can be a useful form of credit," said a debt expert for Think Money. "As long as the card holder can pay the balance in full every month, the question of interest won`t actually matter to them.

"The problems begin when they`re unable to pay it off, and end up with a debt that`s growing rapidly. Anyone who finds they`re forced to pay for day-to-day purchases - such as food or petrol - with a credit card should seek debt advice straight away, as this can be very dangerous."

---

Think Money offer a range of debt solutions, including debt management, debt consolidation loans and IVAs (Individual Voluntary Arrangements). If you are worried about your debt, contact one of our expert debt advisers today.

Tags: debt, bad debt, credit cards, rates, interest rates, credit card rates, credit card interest rates, bad credit, bad credit interest rates, interest rates for bad credit

Our initial advice on your best financial solution is free. Fees payable when continuing service is provided. Calls may be recorded for training and quality purposes.