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Cost of credit card debt could rise

The cost of carrying debt on a credit card could rise along with the Bank of England`s base rate, as a major lender introduces a `radical overhaul` of the way it charges for its services.

Part of that overhaul involves linking the interest rate on Halifax and Bank of Scotland credit cards to the base rate set by the Bank of England, as an article in The Telegraph explains.

Today, the Bank`s rate is still at 0.5%, but it`s due to go up in the future - which could now worry people with credit cards, as well as those with mortgages. After all, the move "could be quickly adopted by other card companies," as Andrew Hagger of Moneynet.co.uk said.

A spokesperson at the IVA Advisory Centre commented: "However they`re borrowing money, it`s important that customers read and understand the terms of the agreement, and find out how any new rules would affect them.

"Knowing what the rules say can help people manage that debt more effectively - and decide if it really is the best kind of credit for them. With credit cards, for example, people can avoid paying interest altogether by making sure they repay the balance every month. If they have any questions about the way the debt `works`, they should contact their lender and ask for an explanation."