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Credit-card interest rates are the most expensive on record

Credit-card users are being bombarded with competitive introductory deals at the moment, but analysis of the market has found that the average purchase rate on cards has hit a high as providers look to offset the losses they make on their initial offers.

It means that savvy consumers who use their cards to make big purchases and pay the balance off before the introductory periods are over can find themselves quids-in – but people who don’t take advantage of the introductory deals, or who pay the balance off over a longer period, pay higher interest than ever before.

The experts at Moneyfacts have found that the average credit-card purchase rate is now at 21.6% APR – the highest rate since the company started monitoring the market a decade ago. As with all averages, this figure masks many much higher individual rates.

“Consumers who struggle with household debts are unlikely to be able to afford the luxury of paying more than the minimum repayment on their credit cards,” said Rachel Springall, of Moneyfacts.

“However, those who cannot afford to pay back more each month are likely to end up with the debt hanging over their heads for a significant period of time.”

Sticking with a high-interest card can mean it takes nearly four years to clear a debt of £1,000. Moneyfacts said someone switching from a card charging the average rate of 21.6% to one charging a low rate of 6.4% would save more than £275 in interest charges. Meanwhile, switching the debt to Halifax’s 40-month interest-free balance-transfer card would incur a fee of £28.50 fee but then no further charges, as long as the balance was cleared before the 40 months was up.

Ms Springall added that some of the worst offenders were store cards. These cards typically offer decent discounts at the point of sale but then charge high rates of interest until the balance is paid off.