A story about the increasing cost of credit for consumers courtesy of the MailOnline website.

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American Express has increased the cost of borrowing on one of its credit cards to 46 per cent — more than 30 times the Bank of England base rate.

The company now charges 46 per cent APR on the British Airways Premium Plus card, making it Britain’s most expensive credit card.

Consumer groups said the cost of borrowing on some credit cards had now lost all touch with the base rate.

A series of other cards also have APR over 35 per cent — despite interest rates now being at the lowest level since the Bank of England was set up in 1694.

Other cards include Virgin Money American Express at 37 per cent and Citi MasterCard at 41 per cent.

Consumer group Which!’s credit card expert Martyn Saville said the Amex rate was ‘ridiculous’.

He said: ‘This is over 30 times base rate.

‘Credit card interest rates now bear no resemblance to Bank rates — it is just about what companies think they can get away with.

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* Bad news for your nest-egg as the base rate drops to a record low

‘Even at 19.9 per cent it is far too high.’

The Amex rate was sent soaring from 36.6 per cent to 46 per cent because the issuer increased the annual charge paid by customers from £120 to £150.

APR calculations take into account the annual fee, prompting the vast rise.
Enlarge Rates

Four of the five cards with high APR have annual fees of up to £300. Amex said the interest charged on transactions had also risen, from 16.9 per cent to 19.9 per cent.

An Amex spokeswoman said fees had not gone up for the last seven years.

‘We”ve held off making any fee increases, however the cost of providing these products has increased.

‘Rather than reduce the benefits on offer, we’ve slightly increased the fee.

The card offers British Airways frequent travelers benefits including 1.5 Air Miles for every pound spent on the card. British Airways said the APR was a matter for Amex

On Tuesday, the Federal Reserve moved the short-term interest rate down to 0%. This allows banks to borrow from one another at no cost. This is the first time in the history of the Fed that they took the rate to zero percent. So what does this mean for consumers? How does it hurt or help the average person in America?

1) Mortgages: Mortgages will be unaffected by the Fed’s move because the interest rate drop only relates to short term products. Mortgage rates move in response to bond prices and in all probability will not move much with this rate. However, if they do move, it should be slightly to the south. (Tom Selleck, the genius behind the miracle of Clintsays.com just refinanced at 5.00% APR!!!) The prime interest rate drop may prove beneficial to homeowners.

2) Credit Cards: Credit card rates are tied to the prime interest rate and credit card rates will drop for prime customers. Customers with poor credit will not see a benefit from the rate reduction.

3) Savings Accounts: As the prime lending rate drops, so does the interest rate that your bank or financial institutions pays on savings and money market accounts (MMA). If a person has money parked in a savings account, the bank will be paying less for you to keep it there. Concerned depositors looking for decent interest rates should look to online banks such as INGDirect, Zions Bank, or Emmigrant Direct. As of the time of this writing, these banks are paying 2.5 to 3.5% on Internet Savings Accounts. The best place to look for interest rates is here. Not bad when you consider most banks will be paying next to nothing.

4) Home Equity Lines of Credit (HELOC): These loans normally have an adjustable interest rate associated with its issuance, so homeowners with these loans will see a reduction in their monthly payment within the next six months. It may be a good time to abandon this ship and get on a fixed rate loan. Especially when interest rates move up again.

5) Other short-term loans: Payday loans, cash advance loans, and payday advance products are not tided to the federal rate and will not be affected by the latest rate cut.

6) Car Loans: The interest rate reduction will best serve auto lenders and auto dealers. Consumers should prepare themselves to see 0.9 and zero percent interest deals from their auto dealers in the coming weeks. The only problem is that those with fair to poor credit histories will not qualify for these auto loans.

In light of the interest rate reduction many consumers will benefit from the Federal Reserves rate cut. However, the cut will stir inflation and lead to bigger issues down the road. Consumers should continue to be careful as they select what credit products they need during this latest economic downturn.