The guidance on this site is based on our own analysis and is meant to help you identify options and narrow down your choices. We do not advise or tell you which product to buy; undertake your own due diligence before entering into any agreement. Read our full disclosure here.
Rate Rise: What it Means for Credit Card Holders
Has the interest rate gone up on your credit card? We've done the math for various scenarios to see what a rate rise means for your credit card debt and how much extra interest you'll pay.
- How Will the 0.25% Interest Rate Rise Affect my Credit Card Payments?
- What Happens if Rates Continue to Rise?
- What Should You Do Next?
Impact of Interest Rate Rise on Credit Card Payments
Those struggling to pay their credit card debt are particularly vulnerable to interest rate rises, and credit cards are usually quick to raise interest rates in line with the Bank of England. How will a future increase affect your finances?
From here, if rates rise another 0.25%, the impact would be the following additional interest charges (assuming the cardholder makes only a minimum payment of 2.5% each month, and no more):
| Outstanding Balance | Additional Interest Charges Due to 0.25% Rate Rise |
|---|---|
| £1,000 | £22 |
| £2,000 | £53 |
| £3,000 | £83 |
Those who pay back their full balance on time each month won't be affected by an interest rate rise.
If a cardholder has a £1,000 credit card balance on a card charging the current market average of 24.7% APR, the cost of carrying that debt is significantly higher than in previous years. Following 14 consecutive Bank of England base rate hikes between 2021 and 2023, credit card interest rates have surged; a typical borrower now pays hundreds of pounds more in interest annually than they did when rates were at their 2018 baseline of ~18%.
What Happens if Rates Continue to Rise?
The interest rate landscape has shifted significantly. While the Bank of England Base Rate peaked at 5.25% in 2023/2024 and has since begun to fall—reaching 3.75% in December 2025—credit card APRs have not followed suit. In fact, despite the recent base rate cuts, the average credit card APR remains at a 30-year high of 24.66%. This means that even as general inflation and mortgage pressures ease, credit card debt remains historically expensive to maintain.
| Interest Rate Rise | Extra Interest Owed (£1,000 Balance) | Extra Interest Owed (£2,000 Balance) | Extra Interest Owed (£3,000 Balance) |
|---|---|---|---|
| 0.25% | £22 | £53 | £83 |
| 0.50% | £45 | £107 | £166 |
| 1.00% | £92 | £213 | £334 |
| 2.00% | £195 | £426 | £670 |
These figures assume cardholder makes only a minimum payment of 2.5% each month, and no more.
Next Steps
Credit card debt is generally expensive, especially if you're on a credit builder card. These products carry higher-than-average interest rates to offset lender risk, with the average APR for credit builder cards now sitting at approximately 36.2%. With some specialist cards charging even more, it is important to improve your credit score and move this debt to a more affordable product as soon as possible.
If you're carrying credit card balances from month to month, there are a few steps you can take to reduce your debt burden:
- Consider moving existing credit card balances to a 0% balance transfer credit card. Despite high APRs on standard cards, the 0% market remains competitive in early 2026. It is currently possible to find interest-free deals lasting up to 38 months (e.g., TSB) or 35–36 months (e.g., Barclaycard and Virgin Money), allowing you to pay down the principal balance without being hindered by record-high interest rates.
- Temporarily reduce any non-essential expenditures (if you have any) to save money for paying down credit card balances
- Consider taking out a personal loan to pay off your credit card balance (but only strong credit ratings will get the lowest interest rates)