A credit crunch is on the cards as shoppers return to Main Street – .

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A credit crunch is on the cards as shoppers return to Main Street – .


One of the few good things about successive lockdowns was that credit card debt fell and we have instead become a nation of savers.

But now shoppers are back on the High Street and in May consumers borrowed more money than they paid for the first time since August 2020, according to the Bank of England.

And the trend is set to continue, with £ 100million credit card loans in June. But borrowers need to prepare, because the post-pandemic plastic world is very different.

There were only 122 credit cards available at the end of last month, up from 162 two years ago, according to data analysts Moneyfacts.

There are far fewer credit cards to choose from, interest rates are higher, and fees for spending abroad are more expensive. The median credit card rate fell from 20.9% in the first three months of 2020 to 21.9% in the second quarter of 2021 – despite the Bank of England base rate remaining at an all-time low only 0.1%, according to the Fairer Finance consumer group.

And several major providers have imposed even harsher rate hikes on borrowers. NatWest increased the rate on its Reward card from 23.7% to 26.8% between May 2020 and July 2021. On a balance of £ 2,500 cleared over five years, that would cost you around £ 217 more in interest according to Fairer. Finance.

Santander’s All In One card interest rate fell from 21.7% to 23.7%, an additional £ 139 over five years and £ 333 over ten. And the TSB Advance Mastercard rate went from 7.9% to 9.9% – £ 134 and £ 297 respectively.

James Daley of Fairer Finance says: “Credit card providers have been slowly raising interest rates for over a decade. Worse yet, some lenders have linked the base rate of the Bank of England so that when rates start to rise again, credit card interest rates will rise again.

“Unfortunately, the people who end up paying the exorbitant prices are often the ones who can least afford them. ”

Unfortunately, the people who end up paying the exorbitant rates are often the ones who can least afford them.

And there is bad news for vacationers, as the cost of shopping and withdrawing money overseas has also increased. Median overseas purchase costs fell from 2.85% in the first three months of 2020 to 2.95% in the second quarter of 2021, according to figures from Fairer Finance.

Average fees for withdrawing cash fell from 2.97 percent to 3.31 percent. And Lloyds Bank has increased its fee for withdrawing cash by credit card to 5%. There are also fewer credit cards offering free spending abroad, compared to the start of the pandemic. In fact, there is less choice in general.

There were only 122 credit cards available at the end of last month, up from 162 two years ago, according to data analysts Moneyfacts. The number of 0% balance transfer agreements – which allow borrowers to reduce the cost of expensive debt – also rose to 60, from 81 in July 2019.

Last year, the financial ombudsman received 15,608 complaints about credit cards. Three in ten were chosen in favor of the client. The most frequently reported issues were difficulties obtaining refunds for canceled vacations and events, and concerns about vendors increasing credit limits to unaffordable levels.

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