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Cost to borrow on credit cards hits 20-year high

ended 17. February 2026

Outstanding balances on credit card accounts grew by 8.5% over the twelve months to November and 47.8% of outstanding balances incurred interest compared to 48.7% in November 2024, according to UK Finance data pubished this morning. 

Any thoughts on this, and whether it is a growing issue for people trying to get a mortgage and a sign of households under pressure, send them across ASAP. Also add any thoughts on the press release below from Moneyfacts, also just out, which compounds the issue.

Borrowers are urged to tackle debts faster as the cost to borrow on credit cards is at a 20-year high, according to Moneyfactscompare.co.uk analysis.

  • Moneyfacts data reveals the average credit card purchase APR has hit a 20-year record-high, at 35.8% APR.
  • UK Finance statistics out today revealed a year-on-year rise in credit card spending to £21.4 billion and 47.8% of outstanding balances incurred interest (November 2025).
  • It has now been 20 years since Chip & PIN fully replaced card signatures for in-store card purchases, and UK Finance statistics shows a 95% reduction to counterfeit card fraud in that time.
  • Next month, banks and building societies will be permitted to amend the £100 contactless card payment limit on credit or debit cards, with customers encouraged to set their own limits, but also give them the authority to turn off the functionality completely.

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:

“The past 20 years has seen a significant shift in the use of credit cards, they are much more convenient and arguably safer, but one area that has got worse is the cost to borrow. The Moneyfacts average credit card purchase APR sits at 35.8% APR for February 2026 (highest rate since records began in June 2006), so borrowers incurring interest need to make fixed repayments to clear debts faster.

 “The latest statistics from UK Finance reveal around half of credit card holders are now incurring interest charges, and while some might only owe a few hundred pounds, there will be others with significantly more debt that needs to be paid back. Luckily, there are some lengthy interest-free balance transfer cards to choose from, with TSB leading the market with a 38-month term, which charges a transfer fee of 3.49%. Reviewing card statements regularly is vital to stay on top of debts, but it’s also wise to make a calendar note of when any balances will incur interest. Shifting debts around is handy to grab interest-free offers, but the debt will hang overhead if only the minimum repayments are made each month.

“Not every borrower will have the best credit score, which is why it’s wise to check a credit report often before applying for a new card, and sort out any discrepancies. Those who get turned down will need to prioritise paying their debts as quickly as possible. Making fixed credit card payments is the fastest way to clear debts, those using a credit card charging 35.8% APR with a debt of £500 would take an entire year to pay it off based on a fixed repayment of £50, and it would cost £85 in interest. Increasing this payment to £100 per month would clear the debt in six months, and halve the interest charged (£42).

“Next month, banks and building societies will be permitted to amend the contactless limit of £100. There have been understandable concerns surrounding fraud of amending any contactless limit, but the change should be putting the power back into people’s hands to set their own limit or turn it off entirely. Consumer behaviour continues to change, many now use their digital wallet to make payments, such as with a smart phone or watch. It is then essential for consumers to keep on top of their transactions, such as setting up notifications each time they spend from their bank, or checking their online statements each week. Credit cards, whether physical or in a digital form, will continue to be of benefit to consumers, particularly for their protection for those who may be ripped off, as any goods or services not received which are valued over £100 up to £30,000 are covered under section 75 of the Consumer Credit Act.”

3 responses from the Newspage community

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Editor
Philly PonniahVerified
Chartered Wealth Manager and Financial Coach at Philly Financial
Credit card debt is creeping up at exactly the wrong time. Balances rising 8.5% year on year tells us that households are leaning on credit to plug gaps. Yes, the share of balances incurring interest has dipped slightly to 47.8%, but that still means nearly half of all card debt is being charged at an average 35.8% APR. That is eye-watering and very hard to outrun. For mortgage hopefuls, this matters. Lenders look at outstanding balances, minimum payments and overall utilisation. High card debt can shrink how much you can borrow or derail an application entirely. Even if you pay on time, heavy usage signals financial strain. The behavioural piece is key. With contactless limits becoming more flexible, the risk is friction falls further and spending becomes even more invisible. Invisible spending fuels visible debt. This does point to pressure building in households. Rising balances plus record APRs is a toxic mix.
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Tony RedondoVerified
Founder at Cosmos Currency Exchange
Debt is becoming a permanent tax on the squeezed middle. UK households face a 'perfect storm' as credit card APRs hit a 20-year high of 35.8% and balances grow 8.5%. This will provide a direct threat to mortgage affordability as lenders closely scrutinise debt-to-income ratios, and record interest payments eat into the 'disposable' income used to calculate loan limits. High credit utilisation also damages credit scores, potentially locking buyers out of the best rates. The March 2026 shift, allowing banks to amend the £100 contactless limit, adds further risk. While giving consumers more control, 'frictionless' spending via digital wallets can lead to accidental debt accumulation. For those under pressure, shifting debt to 0% balance transfer cards is now a critical move to 'stop the bleed' of interest before applying for a mortgage. Half of cardholders now pay in full to enjoy Section 75 protections, while the other half are caught in a record interest trap.
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Ranald MitchellVerified
Director at bad credit mortgage specialists Charwin Mortgages
35.8% APR is a tax on being short of cash. That’s not convenient borrowing, it’s a business model built on people having no slack. Credit card firms will say it’s pricing for risk, but when household budgets are already stretched, that risk pricing becomes a squeeze as minimum payments keep people treading water while interest quietly does the damage month after month. And this doesn’t stay in the credit card world, it also shows up at the mortgage desk. High utilisation and revolving balances don’t just cost more, it cuts mortgage borrowing power and can be the difference between an approval and a failure, even for borrowers who have never missed a payment. If you’re planning a mortgage, don’t let minimum payments run your life. Fix your repayments, drive balances down, and get mortgage-ready.