21.49 per cent, its highest since December 1998. This has triggered calls for new legal caps on the rates, with experts pointing out that the financial industry is unable to justify such exorbitant hikes when the base rate remains at a historic low. “If the Bank of England base rate is the lowest ever, how can you have a credit product which drives people further into indebtedness with the rates continually going up?” Michael Donald, a former director of Visa UK, noted.
He pointed out that it may be necessary for consumers to examine if they need to continue to have debt on their credit cards, particularly at a time when lenders offer rates as low as 2.8 per cent on personal loans.
In many other developed economies across the globe, pandemic-induced lockdowns provided many households with the opportunity to save more and settle large amounts of debt. According to recent reports, in the United Kingdom, a total of up to £14 billion of outstanding payments on credit cards were paid off since February 2020. However, this was not the case for some of the poorest households, which have resorted to credit cards to finance increasing living costs, particularly amid a growing number of job losses on account of COVID.
“We are in the grip of a household credit crisis and it’s concentrated on those on lower incomes whose position is worse than it was before the pandemic. They are being charged exorbitant rates,” Joe Cox, a senior policy adviser from Jubilee Debt Campaign, said, calling on the government to introduce the same financial restrictions on the credit card firms as on the lenders of payday loans.
