Many credit card users are facing the highest interest rates in over two decades, despite a general decrease in borrowing costs elsewhere. Recent findings from financial experts at Moneyfacts reveal that the average annual percentage rate (APR) on credit cards has surged to a staggering 35.8%, the highest on record since June 2006.
Rachel Springall, a finance specialist at Moneyfactscompare.co.uk, highlighted the evolution of credit card usage over the past 20 years, emphasizing the growing convenience and safety of these financial tools. However, she cautioned that borrowing costs have escalated, urging borrowers to stick to fixed repayment plans to expedite debt clearance.
This spike in credit card rates contrasts with the Bank of England’s base rate of 3.75%, with potential further reductions looming. Consequently, credit card companies are currently levying nearly ten times the Bank’s primary rate.
Simultaneously, major UK banks like Barclays, including its Barclaycard division, have reported substantial profits, with Barclays alone generating over £9 billion in profits last year. Notably, credit card spending surged to £21.4 billion in November 2025, a 2.6% increase from the previous year, as reported by UK Finance.
Recent data also indicates a slight decline in the number of credit card balances incurring interest, dropping to 47.8% in November 2025. This shift suggests that many borrowers are capitalizing on interest-free promotions. Notably, TSB leads the market with a 38-month interest-free balance transfer offer, accompanied by a 3.49% transfer fee.
Philly Ponniah, a chartered wealth manager at Philly Financial, expressed concern over the rising outstanding card balances and elevated rates, which could adversely impact mortgage applications. Ponniah cautioned that mounting credit card debt could limit borrowing capacity or even thwart mortgage approvals, emphasizing the financial strain signaled by high card debt and record APRs.
Ranald Mitchell, director at Charwin Mortgages, likened credit card rates to a form of taxation, advising prospective homeowners against making minimum payments. He criticized the 35.8% APR as essentially taxing individuals facing financial constraints, cautioning against the persistent damage caused by minimum payments and accumulating interest.