If you have been comparing credit cards recently and wondered why the interest rates look so steep, you are not alone. Average advertised purchase APRs in the UK are sitting at around 36 percent, a level not seen for at least two decades. This guide explains why that has happened, and what it means for you when you are weighing up a card.
What borrowers need to know
The headline figure is striking. According to Moneyfacts, the average advertised purchase APR on UK credit cards reached approximately 36 percent in early 2025, a multi-decade high. (Moneyfacts updates its credit card rate tracking monthly; it is worth checking their site for the most current figure.)
A few things are worth understanding here:
- This is not purely a Bank Rate story. The Bank of England base rate influences mortgage and savings rates quite directly. Credit card pricing works differently. Lenders use it as one input, but it is far from the only one.
- Risk-based repricing is the main driver. After the cost-of-living squeeze, lenders saw more customers struggling to repay. FCA data on consumer credit arrears shows that the proportion of credit card balances in arrears rose noticeably between 2022 and 2024, reaching levels last seen around 2018 according to the FCA's Consumer Credit data releases. To cover that higher expected level of bad debt, lenders raised the rates they charge to everyone, including people with solid credit histories.
- The representative APR is a marketing figure. Under FCA rules (CONC 3.5), lenders are only required to offer the advertised representative APR to 51 percent of accepted applicants. The remaining 49 percent can be offered a higher rate based on their individual risk profile. So even if the headline rate is 36 percent, yours could be higher still. See the FCA's CONC 3.5 guidance for the full rule.
Why this matters
Credit card interest compounds quickly. At 36 percent APR, a £1,000 balance carried month to month is expensive to service. MoneyHelper's worked example illustrates the point concretely: on a £1,000 balance at a high purchase APR, making only the minimum payment each month, a borrower can end up paying well over £1,000 in interest alone and take more than a decade to clear the debt. You can work through your own figures using the MoneyHelper credit card calculator. The longer a balance sits unpaid, the more expensive it becomes.
Understanding that advertised rates are not the rate everyone gets is important. The rate offered to you depends on your credit file, your income, and the lender's own appetite for risk at that moment.
If your main concern is avoiding purchase-rate interest altogether, it can help to compare 0% balance transfer cards as a separate category. These typically charge no interest on transferred balances for a promotional period, though they usually carry a transfer fee and revert to a standard rate afterwards.
Who may be affected
This is relevant to most people shopping for a new credit card, but it is especially worth pausing over if you:
- Plan to carry a balance rather than pay in full each month
- Have a thin or patchy credit history, as you are more likely to be offered a rate above the representative figure
- Are consolidating existing debt onto a card, the actual rate offered matters far more than the advertised one in that scenario. If you are worried about existing debt levels, free and impartial help is available from MoneyHelper and StepChange.
- Are new to credit and comparing cards for the first time
If you pay your balance in full every month, a high purchase APR has no direct cost to you. The rate only bites when interest is actually charged.
For a fuller explanation of how credit card interest works and how to compare cards more confidently, see the credit cards guide and the personal loans guide. Glossary entries for APR and representative APR are also available.
Sources
- Moneyfacts, credit card average APR tracker (updated monthly). See moneyfacts.co.uk.
- MoneyHelper, guidance on credit card costs, how APR is calculated, and the credit card repayment calculator. See moneyhelper.org.uk.
- Financial Conduct Authority (FCA), Consumer Credit data releases on arrears and write-offs; rules on representative APR under CONC 3.5. See fca.org.uk and FCA CONC 3.5.