Thursday 22 February 2018

Banks raise cost of credit cards and cut savings rates

Charlie Weston Personal Finance Editor

THE cost of credit cards and overdrafts have gone up at a time when household budgets are being squeezed.

And the interest rates being paid by bankers to consumers who deposit their money with them have fallen, new research from the Central Bank shows.

Credit card and overdraft interest is higher in this country than other parts of the eurozone.

The average interest rate on cards, one-year loans and overdrafts charged to households rose slightly in May to 8.68pc, Central Bank statistics show.

Overdraft rates range from 9.99pc on the Ulster Bank U First Gold account to 15.9pc charged by Bank of Ireland.

On top of this, surcharge interest of up to 12pc is charged for an unauthorised overdraft.

Credit card interest rates vary from 13.6pc for AIB's Click card to 22.7pc for the same bank's Mastercard and Visa cards, according to the National Consumer Agency.

Asked why the Central Bank overdraft figures were much lower than those quoted by the Consumer Agency, the Central Bank said its survey covers a much broader range of banks and interest rates. And its figures also include one-year loans, which have much lower rates than cards and overdrafts.

The Central Bank said the interest on loans to buy items such as cars were also up, at an average of 5.88pc.

But the interest rate on mortgages has fallen. Homeowners saw the average mortgage rate fall to 2.98pc at the end of May as a result of European Central Bank cuts in its key rate in November and December.

The ECB cut rates this month, but most of the 250,000 variable rate mortgage holders are not expected to benefit from this.

AIB, EBS, National Irish Bank, Bank of Ireland, KBC Bank, Irish Nationwide -- now called Irish Bank Resolution Corporation -- are still considering whether to pass on the latest cut to variable customers. Ulster Bank has passed on the cut but still has the highest rate at 4.5pc. Permanent TSB has cut its variable rate by 0.35pc to 4.34pc.

Bank of Scotland, which includes Halifax, said yesterday it was passing on last week's ECB rate cut to its variable rate customers. The bank is closed here but has a legacy of what is understood to be around €8bn in residential mortgages it is still servicing.

The Central Bank study also shows that the interest being paid on short-term deposits have fallen, as banks cut what they will pay savers.

The average interest rate paid for money on deposit for up to two years has fallen to 3.66pc.

Banks including Bank of Ireland, ICS, EBS, Ulster Bank, Nationwide (UK) Ireland and AIB are among lenders that have dropped deposit rates, a trend experts expect to continue.

But rates for money put away for at least 18 months is up. The average rate for money on deposit for longer than two years increased slightly to 2.54pc.

Irish Independent

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