While credit card interest rates rise, fewer consumers have credit card debt

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From Q1 2008 to end of 2008, the average credit card interest rate increased from 10% to an all time high of 15.7% by end of the year, a 57% increase. During this time the BOE has cut rates from 5% to 0.5%. Despite the interest rate increase, British consumers are less likely to have credit card debt than they were before the credit crunch started. In Q1 2008, 63% of consumers had revolving balances vs. 50% by end of 2008, this according to research published by Auriemma Consulting Group. That is a 21% drop in likelihood of having credit card debt.

The data shows that in Q1 2008 the average consumer credit card debt was £1,651. This dropped by 12% to £1,453 by end of 2008. However, with consumers having household income below £30,000, credit card debt increased by 23% over the same time from £1,111 to £1,366. This goes to show consumers that can afford to lower their debt levels did just that, however lower income households suffered. They were particularly hit by the over 50% increase in interest rates.

Does UK needs to look at capping credit card interest rates like the recent legislation in US by their house of representatives? Or should the consumers take more responsibility for their financial situation and live within their means. Maybe we need a little bit of both. Please comment and let us know what you think?