These credit cards are a right rip-off

Although the base rate is the lowest in history, credit cards still charge shockingly high interest rates. This exclusive research names the worst offenders!

Since March, the Bank of England base rate has remained at an all-time low of 0.5% a year. At the beginning of October 2008, it stood at 5%, so it fell a long way in a short time. As the base rate plummeted, variable-rate mortgages also followed suit. Indeed, some homeowners with tracker mortgages have seen their rates fall below 1% or even drop below zero.

Although borrowers without fixed-rate mortgages have enjoyed rate cuts, millions of borrowers with non-mortgage debts have missed out. In particular, the UK's 70 million users of credit cards are being taken for a ride. Indeed, as I warned in Credit-card costs continue to climb, interest rates on plastic have been rising, not falling...

The great credit-card con

With the base rate at 0.5%, it should be easy for credit-card issuers to make money by charging an interest rate of, say, 9% a year. This should comfortably cover their borrowing costs, administrative expenses and bad debts, leaving a reasonable profit for shareholders. Alas, according to lovemoney.com partner Moneyfacts, the average interest rate charged on credit-card purchases is a whopping 18.1% APR!

As I often remark, 'averages invite comparisons' -- in other words, an average doesn't tell you much about your personal situation, only that of the typical case. So, let's take a look at just how big a rip-off credit cards can be.

Earlier today, I analysed the interest rates charged on purchases by 244 different credit cards. Of these, 14 charge yearly fees, which I've put into the following table:

Credit cards with annual fees

(sorted from highest to lowest fee)

As you can see, some of these cards appear to charge staggeringly high APRs of 30% or more. However, this is because the APR calculation is distorted by the annual fee. As many of the above cards are 'premium' cards with yearly fees of £100+, their APRs appear artificially high. In fact, the interest charged by most of these cards is below the average. For more on this topic, read Watch out for lenders' sneaky tricks.

Then again, with 230 no-fee credit cards to choose from, I see no great reason to have a fee-charging card, so I'll move swiftly on to fee-free cards.

The credit-card Hall of Shame

Here are 11 credit cards which charge an annual percentage rate (APR) on purchases of over 20%:

The four most expensive cards (from Vanquis Bank, aqua, Capital One and Barclaycard) charge between 39.9% and 27.9% APR. However, these 'subprime' cards are aimed at riskier borrowers -- those with little or no previous credit history, or a tarnished credit record. Thus, they charge high fees in order to offset the greater risk of default.

The remaining seven cards are simply expensive mainstream cards which should not be used for borrowing. If you're paying interest on these cards, then try switching your balance to a 0% balance transfer card. In return for a transfer fee of up to 3%, these cards freeze the interest on your transferred debt for up to 16 months.

The credit-card Hall of Fame

Finally, to complete the picture, here are six cracking credit cards charging purchase rates under 10% a year:

Given that these star cards can charge such low rates, why do the remaining 238 credit cards charge such high rates? Clearly, loyalty doesn't pay in the credit-card world!

For the record, here are 49 credit cards which charge an interest rate above the average of 18.1% APR:

More: Find your perfect credit card | Cracking credit cards for savvy spenders| Support your team, but don't take out their credit card