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Credit card holders still pay up to 17%
Danny Brierley5 Dec 2008
Bank chiefs came under fire today after being accused of ripping off customers by not passing on interest rate cuts to credit card holders.
Consumer groups said credit card charges bore no relation to the Bank of England's base rate, which fell to two per cent yesterday, the lowest level for 57 years.
Credit card customers are now paying an annual interest of 17 per cent on average, eight and a half times the bank's base interest.
Experts warned today that while banks have dropped some mortgage rates, they have not acted on high credit card charges.
The call came just days after Treasury officials met bank chiefs to persuade them to lower the charges. Both the Prime Minster and the Chancellor have also called for the full rate cut to be passed on to borrowers.
Eddie Weatherill, chief executive of the Independent Banking Advisory Service, said card issuers had been "very sluggish" in dropping their rates. He said: "The rates do not reflect the base rate, they reflect what they want to lend at."
Mr Weatherill also warned that, while monthly charges appear to be low, they were masking big annual rates. He said: "People have been conned by the rates charged for many years. If banks are borrowing money at two or three per cent and then charging one-and-a-half per cent a month they are making 15 per cent on their margins.
"Nobody in government has got ahead of the game because they have loved these people making lots of money and taking lots of taxes from them, leaving consumers to themselves.
"They are not going to change the rates any time soon. It is a 'borrower beware' situation -you have got to look for a better deal for yourself. People have been apathetic because they have let the bankers and lenders get away with murder."
The call to lower credit card rates comes amid fears that the second full percentage point cut in less than two months would have "very little short-term effect" on consumer spending.
Neil Saunders, consulting director at consumer forecaster Verdict Research, compared the one per cent cut from the Bank of England's base rate to "facing a tsunami and holding up an umbrella". He said: "It's not a solution. It's about trying to ease some of the decline, making sure the eventual landing is not too harsh and managing for the longer term. If the Bank of England had wanted to ease some of the pressure on the high street they would have had to act six to eight months ago."
Uswitch, a price comparison service that finds consumers the best deals on credit cards, said the rates were "heading in the wrong direction".
