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Bank claims: Insolvencies lead to higher credit card rates

Credit card rates are continuing to rise as lenders fear customers may not be able to keep up their repayments, it has been claimed.

The Bank of England's (BoE) latest Trends in Lending report has found that the average interest rate on a credit card hit 12.38 per cent in June, compared to 12.08 per cent two years ago.

The report cited the increase in personal insolvencies is the main reason behind the rise.

A spokesperson for claimed those who are struggling to make repayments will often begin to forego their unsecured lending such as credit card payments.

She said. "Obviously the risk of that happening, even when we've got more public sector job cuts expected, is why that extra risk is being passed on to higher rates."

The Insolvency Service reported that personal insolvencies during the second quarter of 2010 in England and Wales were five per cent higher than in the same period last year.

Posted by Jennifer Haines

Jennifer's speciality knowledge is credit card changes and balance transfers. ADNFCR-2776-ID-800036646-ADNFCR

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