Credit card rates rise as interest rates fall

BANKS have increased interest rates on millions of credit and debit cards even as the cost of borrowing plunged to a 53-year low, according to a report.

A study of 240 credit cards showed that while the Bank of England reduced its official bank rate from five per cent in May to three per cent this month, the cost of borrowing on cards had risen.

Research by banking experts Defaqto for the Independent showed that since May, the average annual percentage rate on cards rose by 0.4 per cent, climbing to 17.6 per cent.

Last week the Monetary Policy Committee cut rates to three per cent and Chancellor Alistair Darling said it was "essential" that banks passed the cut on. But the latest study will do nothing to allay fears that consumers are failing to reap the benefit.

Consumer website MoneyExpert.com found that rates on store cards had risen a full percentage point in the last six months, making the average rate now 25 per cent.