By Alison Steed
NEARLY 6m people have had their credit card limits increased by a total of £8.8 billion in the last 12 months – without even asking for the rise.
The average increase on cards went was £1,538, putting the average limit up from £5,129 to £6,667 according to research from uSwitch.com, meaning the average interest bill has gone up from £800 to £1,040.
If these customers used up their entire credit limits, they would collectively face an annual interest bill of £5.9 billion.
Nearly a third of all credit card holders – 9.3m – have seen their limits rise or fall in the past year, and 4m have asked for an increase, with nearly a third of these requests being turned down.
Louise Bond, personal finance expert at uSwitch.com, said: "In the current climate you could be fooled into thinking that increasing credit limits without permission is a good thing as it stops people going over their limits and incurring extra charges. However, the issue is far more complicated as providers are taking away consumer choice by throwing extra credit at people without their consent. There is also a question mark around how these people are selected for an increase or decrease to their limit and if this in itself is in the customer's best interest.
"Unless you are one of the 68 per cent of consumers that regularly pay their credit card bill in full, keeping high levels of debt on interest bearing credit cards isn't advisable as it's an expensive form of borrowing. In most cases, providers really aren't helping consumers by throwing cash at them as it could be placing unnecessary temptation in their path."
The annual percentage rate (APR) on credit cards has gone up by an average of 0.74 per cent in the last year, taking average rates from 16.95 per cent to 17.69 per cent. Average rates for personal loans are currently at 9.07 per cent – 8.62 percentage points lower than the typical credit card rate.
