Shoppers are being urged to think twice before putting purchases on their credit cards this Christmas with rates hitting a 23-year high.
Bank of England (BoE) figures show average annual interest rates on credit cards were consistently over 20% in 2021, measuring 21.43% by the end of November.
Credit card interest rates haven't been this high since December 1998, according to the Bank's data.
Here, Which? takes a look at how credit card interest has changed and what to do if your credit card debt is getting too expensive.
The graph below shows how rates have changed since March 1995 - based on Bank of England data.
Source: Bank of England data
Credit card interest rates remained relatively flat and under the 18% mark between December 2014 and the end of 2017, but have been rising steadily since March 2018.
The average interest rate charged on credit cards reached a 23-year peak of 21.49% in May earlier this year but has fallen slightly to 21.43% in November.These 2021 figures are the highest rates since December 1998 when the average was 22.19%.
The Bank of England credit card lending data is a monthly weighted average interest rate based on the advertised APRs of credit card lenders.
Higher interest rates could risk more people falling into debt if they cannot keep up with the repayments.
Credit cards usually won't charge interest if you spend and pay back what you borrow each month - and some come with 0% offers, which means you can spread the costs over a longer period. But if you don't have a plan on how to repay what you owe you could face issues.
If you had a credit card charging 21.43% APR and put £500 on it this Christmas and make repayments of £10 each month, it would take eight years and eight months to pay off and you would pay a total of £544.90 interest in total.
However, if you had the same rate and borrowed the same £500, but made repayments of £100 each month, it would take five months to pay off and you would pay a total of £25.81 interest in total.
Research by debt charity StepChange found that around four million people are expected to borrow for Christmas this year, compared to 2.7m last year.Around a quarter of those expecting to borrow say it will take them at least a year to pay back.
If you have credit card debt that is starting to become a problem there are steps you can take to get back in control.
Jot down the credit card and store cards you have and how much you owe on each.
Then take note of the repayments you make on them each month. Is it just the minimum monthly payment or a fixed sum?
Finally, work out how much you are paying in interest on the deals you have.
You might find when you look at your credit card debts in the round that one credit card is costing you more than others.
If you have a 0% deal with seven months left and a card charging 21.43% APR now, it's worth trying to clear the more expensive debt first.
If you haven't got one already it's worth creating a budget to see where you can make savings that can go towards your debt.
You might find you can end a few subscriptions here and there to get some extra cash.
Once you have space in your budget you should consider upping your repayments to clear your debt sooner and pay less interest.
A simple change you can make is to opt for a fixed payment rather than just the minimum payment.
That's because the minimum payment on a debt is usually charged as a percentage of your remaining debt which means it reduces as your debt goes down.
For example, a minimum repayment of at least 2% on a debt of £500 is £10, but once your debt gets to £400 your minimum repayment falls to £8.
By having a fixed payment you can ensure you are putting the most you can against the debt and paying it off sooner.So just opting for a £10 fixed payment can help.
While it's good to have a financial cushion for use in emergencies, there's little logic in having savings if you also owe a lot of money on a credit card.
The rates available on the best instant-access savings accounts are significantly lower than the average interest rate on a credit card.
Using your savings to pay off your borrowing could save you hundreds of pounds a year in interest charges.
If you're paying interest on credit card debt, think about switching your balance to a 0%-balance-transfer deal.
These allow you to shift debt from expensive credit and store cards and freeze the interest for a set period - giving you the chance to pay the debt down faster and save money as all your payments will go towards the debt rather than the debt and interest.
Despite credit card interest rates hitting a new high, now is a good time to look for a 0% balance transfer card.According to Moneyfacts, 0% introductory balance transfer terms have lengthened, associated fees to transfer have fallen and there is more choice.
The average interest-free balance transfer term on credit cards rose to 577 days, from 548 in September. Currently, the best deal offers up to 35 months interest-free.
Just watch out for the balance transfer fee. Some cards don't charge a fee but others can charge up to 2.75% for each transfer, so if you have multiple cards you want to clear the costs will start to add up.
If you are struggling with repayments it's also worth contacting your provider to see if they can offer any help.
In 2018 the Financial Conduct Authority (FCA) brought in new rules to help the estimated three million people in persistent credit card debt (where a person has spent more on interest and fees than they have repaid on the outstanding debt).
Banks are now obliged to send letters to customers who have been in persistent debt for 18 months, warning them about the cycle they're in. 18 months later credit card providers must offer customers a method of repaying their balance over a reasonable period. This could be by reducing or waiving interest rates or charges.
Just bear in mind that lenders also have the ability to suspend your card to stop you from borrowing.
Where to get free debt advice
A number of charities will offer free, independent advice over the phone and online.
These include Citizens Advice, National Debtline, StepChange Debt Charity, Debt Advice NI, Debt Advice Foundation, Debt Support Trust, PayPlan and the Community Money Advice.