Typical interest on credit cards, overdrafts and personal loans

Borrowing money without securing it against a home costs more than a mortgage, and the three main ways of doing it, credit cards, overdrafts and personal loans, sit at very different price points. On the Bank of England's measure, the average interest rate charged on credit card lending was 21.45% in April 2025¹. Overdrafts on most current accounts charge around 40%². Personal loans have historically been the cheapest of the three, with an average rate of 12.69% used in official analysis of the market³.

These averages move far less than mortgage rates when the Bank of England changes Bank Rate. Bank Rate rose from 0.1% in December 2021 to a peak of 5.25% in August 2023, then was cut twice in 2024 and three times in 2025 to 4%⁴, yet the average credit card rate in April 2025 was still close to where it had been for years. This page sets out the official averages for each type of borrowing, how they have changed over time, what happens when promotional offers end, and where the figures come from.

Average credit card interest: 21.45% on the Bank of England's measure

The headline figure for credit card interest comes from the average interest rate series the Bank of England publishes, the same series used to build the interest on debt measures within the Household Costs Index¹. On that measure the average rate charged on credit card lending stood at 21.45% in April 2025¹. That is an average across the whole market, not a rate any particular card charges: individual cards sit either side of it, and the rate a person actually pays depends on the card they hold and, for some cards, their credit history.

The average has not always been this high. An earlier official comparison put the average effective interest rate for credit cards at 18.4% in January 2010⁷, and a review of credit card literature around the same period measured the weighted average interest rate at 18%, noting it was roughly the same in the UK and the US, with typical interest rate charges on credit card debts usually as high as 15%⁸. The long-run picture is therefore of a rate that has drifted upward over fifteen years, from the high teens to the low twenties.

Two things make the average rate less painful than it first sounds. Around 40% of credit card debt incurs no interest at all, because those balances are cleared within interest-free periods⁹. Of the roughly £57bn of credit card debt outstanding when the FCA studied the market, approximately £34bn incurred interest and £23bn did not⁵. The people who pay the average rate are the ones carrying a balance from month to month.

Among those who do pay interest, the costs are substantial. The FCA estimated that consumers on accounts incurring over £100 of interest a year paid on average £225 a year in interest on purchases, of which they could save over £150 by choosing a cheaper credit card¹⁰. The average balance per person on interest-incurring accounts was around £2,000¹⁰. A separate official estimate put the average amount outstanding per active account at £1,839 in 2009⁷, so the size of a typical revolving balance has been fairly stable for a long time.

How people use their cards also matters. The UK Cards Association estimated the average utilisation rate, the share of an available credit limit actually used, at about 25%⁵. But the FCA found that 6.6% of active consumers, some 2.1 million people, maintained a credit limit utilisation of 90% or more over the year while incurring interest¹⁰. Running that close to the limit is one of the clearest markers of a borrowing cost problem, and it is one of the things lenders look at when deciding whether to raise a credit limit. The FCA also found that 5.2% of active consumers, 1.6 million people, repeatedly made only minimum payments while incurring interest¹⁰, a pattern that extends the life of a debt and the total interest paid on it.

One reason people end up paying interest unexpectedly is that they did not plan to. In the FCA's final credit card market study, 19% of consumers surveyed who paid interest on their main credit card in the previous 12 months said they had not expected to do so when they took the card out¹⁰. The proportion of credit card debt incurring interest was 42% at the end of 2015, down slightly from 43%¹⁰.

When a card is advertised with a rate, the figure shown is a representative APR. The rule is that the representative APR must be an APR at or below which at least 51% of consumers entering into agreements as a result of the advertisement are expected to pay¹¹. So nearly half of successful applicants can be charged more than the advertised rate. The APR itself is calculated on a standard assumption: that the credit limit is drawn down in full on the first day of the agreement and repaid in 12 equal monthly instalments with no further transactions¹¹. That assumption rarely matches how anyone actually uses a card, which is one reason the APR understates what a long-running balance costs. How interest is actually charged, daily on the balance, is covered in the credit cards guide.

Promotional 0% deals and what happens when they end

A large part of the credit card market is built on limited-time 0% deals on balance transfers and 0% purchase deals⁹. These offers charge no interest on the promoted balance for a fixed period, after which any remaining balance starts accruing interest at the card's standard rate. They are the main reason around 40% of credit card debt incurs no interest⁹: much of it sits inside a promotional window.

The supply of these deals changes with market conditions. In the Bank of England's Credit Conditions Survey for the first quarter of 2026, lenders reported that the length of interest-free periods on new credit cards for purchases increased in Q1, and was expected to increase slightly in Q2¹². Longer interest-free windows make a 0% deal more valuable to a borrower, because there is more time to clear the balance before the standard rate applies. The survey is quarterly, so the picture of how generous these offers are is updated regularly.

What happens at the end of a promotional period follows a fixed pattern:

Minimum payments are still due during the promotional period, so a 0% deal suspends interest, not the obligation to repay. When the offer ends, the remaining balance is charged at the card's standard rate, which for many cards will be at or above the market average of 21.45%¹. A borrower who cannot clear the balance before the window closes can move it again with a balance transfer, though transfer fees apply, or convert it into structured repayments with a personal loan. The loans guide covers how that works.

Overdraft interest: around 40% on most current accounts

Overdrafts are the most expensive mainstream form of borrowing. MoneyHelper states that borrowing with an overdraft on a current account normally means paying daily interest of up to 40%², and the House of Commons Library records that after the 2020 rule changes, nearly every mainstream bank decided to charge an interest rate of approximately 40%¹⁴. MoneyHelper's guidance on opening, switching or closing a bank account makes the same point: overdrafts charge daily interest, often up to 40% APR, until the balance is paid back¹⁵. Even credit union current accounts, which often undercut the big banks on other features, can charge daily interest of up to 42.6% on their overdrafts¹⁶.

The 40% figure is recent in one sense and long-coming in another. In 2010, evidence to the Treasury Select Committee put the average authorised overdraft rate at 18.86%, described at the time as higher than any rate for the previous 15 years¹⁷. The move to roughly 40% came after the FCA banned most overdraft fees and tiered pricing in 2020, which pushed the whole cost of an overdraft into a single interest rate. The Commons Library's account of that reform notes the near-universal settling at approximately 40%¹⁴.

Why overdrafts cost more than cards is structural. The Bank of England notes that certain types of borrowing, such as overdrafts, revolving credit on your credit card and payday loans, also charge higher interest than other forms of borrowing¹⁸. Overdrafts are typically small, open-ended and available without a fresh application, and the lender has less certainty about when the money will come back. MoneyHelper is blunt about how they should be treated: an overdraft is a form of debt, usually carrying expensive daily interest, so it should only be used for emergencies or as a short-term option¹⁹.

The scale of overdraft use is large. The FCA's Financial Lives survey found that 21% of all UK adults had an overdraft, now or in the last 12 months, in 2024, compared with 65% holding a credit card and 14% a personal loan⁶. Many overdrafts are small: OFT analysis of 16 banks found that 40% of overdrawn accounts were up to £100 in value¹⁷. But because the interest is charged daily on the balance, even a small persistent overdraft accumulates cost quickly at a 40% rate. The current accounts guide covers how overdrafts are attached to accounts and what the alternatives are, including credit unions.

Personal loans compared with cards and overdrafts

Personal loans are the cheapest of the three on the averages, and they behave differently. Official analysis of the market assumed an average personal loan of £7,817 with an average term of 5 years and an average interest rate of 12.69%⁷. That rate was based on Bank of England advertised rates for a representative £5,000 loan⁷. Against a credit card average of 21.45%¹ and overdraft rates around 40%², a loan is roughly half the cost of card borrowing and a third the cost of an overdraft, on the official measures.

The structural difference matters as much as the rate. A loan has fixed monthly repayments over a set term, so the debt is guaranteed to shrink and end, typically within about five years on the average loan⁷. A card balance or overdraft has no end date: the borrower decides the pace of repayment, subject to minimum payments, and interest accrues for as long as a balance remains. The FCA's finding that 1.6 million people repeatedly made only minimum payments on cards while incurring interest¹⁰ shows how long unstructured borrowing can persist.

The comparison also depends on how much is being borrowed and for how long. For a balance that can be cleared within a 0% promotional window, a card can cost nothing in interest, beating any loan. For a balance that will take years to clear, the loan's lower rate and fixed term tend to make it cheaper overall. Official analysis from 2010 estimated that switching to the cheapest deal would save a credit card customer approximately £120 a year in repayments⁷, and the FCA later estimated over £150 a year could be saved by consumers paying more than £100 in interest¹⁰.

The average balance tells its own story about who carries card debt. The FCA's Financial Lives survey found the mean outstanding balance for adults who revolve a balance on a credit or store card was £550 in 2022, down from £790 in 2020²⁰. That sits below the £2,000 average balance per person on interest-incurring accounts found in the FCA's market study¹⁰, because the Financial Lives figure averages across all adults who revolve, including many with small balances. For small balances, the difference between a 12.69% loan and a 21.45% card is modest in cash terms; for balances in the thousands, it compounds quickly.

How Bank Rate feeds through to what you pay

Bank Rate is the core interest rate in the UK and it is set by the Bank of England²¹. It is the single most important driver of mortgage costs, and the Bank itself describes setting the interest rate as something that impacts the cost of getting a mortgage²². But the feed-through to unsecured borrowing, cards, overdrafts and loans, is much weaker and much slower.

The path of Bank Rate over recent years has been dramatic. It rose from 0.1% in December 2021 to 5.25% in August 2023²³, a tightening cycle that took the rate to its highest in years. It was then reduced twice in 2024, in August and November, from 5.25% to 4.75%²⁴. In 2025 the Monetary Policy Committee lowered it three more times, from 4.75% to 4%⁴.

Through that entire cycle, the average credit card rate moved far less. It was 18.4% in January 2010⁷ and 21.45% in April 2025¹, a drift of a few percentage points across a period in which Bank Rate went from near zero to 5.25% and back down to 4%. Overdraft rates were around 18.86% in 2010¹⁷ and around 40% by the mid-2020s¹⁴, but that jump was driven by the 2020 regulatory reform, not by Bank Rate. Unsecured lending rates are set by lenders' own funding costs, loss expectations and risk appetite, and they are far less directly indexed to Bank Rate than variable mortgages.

There are several reasons for the weak link. Consumer credit accounts for around one eighth of total lending to households, with mortgage lending comprising the other seven eighths²⁵, so lenders price it as a distinct, higher-risk business. The Bank of England also notes that it takes time for rate changes to work through the economy, usually up to two years²⁶. Lenders' own behaviour shifts too: the Bank's Credit Conditions Survey tracks how lenders are changing rates, terms and availability quarter by quarter¹², and those decisions respond to competition and risk as much as to Bank Rate.

The scale of the market matters for understanding why. Credit card lending was growing at 12% a year in the most recent data cited by the Bank in 2023²⁵, and 15% of adults reported increasing their borrowing in response to cost-of-living pressures at the end of 2022²⁵. Consumer credit excluding student loans splits into credit card lending and other lending, mainly overdrafts and other loans²⁷. The Bank tests whether the largest banks can cope with big losses from unsecured debt¹⁸, which is a reminder that this is the part of household borrowing lenders consider most likely to turn sour, and price accordingly.

Bank Rate itself exists to serve the Government's 2% inflation target²⁸. When inflation is above target, raising rates is the Bank's main tool for bringing it down²⁶. The mechanics of that, and how it reaches mortgages rather differently, are covered in how a Bank Rate change affects your mortgage payments and the wider Bank Rate, inflation and the UK economy guide.

Fees and charges on top of interest

Interest is not the only cost of borrowing. On credit cards, default charges, typically £12, apply when a consumer goes over their credit limit, is late making a payment, or has a payment returned⁵. An FCA thematic review found that most credit and store card providers in its sample charged up to £12 for each type of fee²⁹. Because the charge is per fee type, a single month of difficulty can trigger more than one £12 charge, on top of the interest accruing on the balance.

Other products have their own fee structures, and some are capped. On payday loans, default fees, the amount that can be charged if the loan is not repaid on time, are capped at £15³⁰. Balance transfer fees on 0% card deals are charged as a percentage of the amount moved, and they are the reason a "free" transfer is not quite free.

Where a firm has wrongly charged a customer, compensation can carry interest. The Financial Ombudsman Service states that the interest rate for late payment is usually 8% simple a year³¹. From 1 January 2026, for complaints referred to the ombudsman, the default interest rate for deprivation of money changes to simple interest at the average Bank of England base rate plus 1 percentage point³², a rate the ombudsman says will track the Bank of England's base average rate plus 1%³³. Anyone complaining about a charge or interest should check which rate applies to their case.

Where the average figures fall short

The averages on this page are market-wide, and they can mislead in both directions. Averages blend together borrowers who clear their balances monthly, who pay nothing, with borrowers stuck at high utilisation paying the full rate. The FCA found 6.6% of active consumers, 2.1 million people, sitting at 90% or more of their credit limit while incurring interest¹⁰, and 5.2%, 1.6 million people, repeatedly making only minimum payments¹⁰. For those groups, the personal cost of borrowing is far worse than any average suggests.

Arrears figures show where the strain sits. In the FCA's market study sample, severe arrears stood at 1.9% and serious arrears at 4.9% of balances¹⁰. Those are small percentages of a very large market, but they represent hundreds of thousands of accounts. The FCA also found that 19% of consumers caught by a potential problem debt indicator were in difficulty, only slightly higher than the average across all consumers at 19%¹⁰, a reminder that problem debt is not confined to an obvious subgroup.

The averages also hide how rates are distributed. Research for the FCA on overdraft and credit card users found many respondents had originally requested credit limits in the hundreds of pounds, with £500 to £750 a typical range³⁴. People borrowing small amounts at high rates can pay proportionally more once fees are included, and people borrowing large amounts at average rates pay far more in absolute terms. The average credit card fee itself has varied over time: one official review put the average fee at £73.07, significantly lower than the long-term average of £97.62⁸.

History shows how much the market can change. Credit card debt per adult in the UK was £310 in mid-1996, £450 in mid-1998 and £750 by mid-2000³⁵, a period of rapid growth in card borrowing. Between 2000 and 2013, credit card gross lending by banks rose from around £35bn per quarter to nearly £60bn per quarter⁸. Today's averages are a snapshot of a market that has expanded and repriced repeatedly.

Finally, the averages say nothing about an individual's situation. The rate a person is offered depends on their credit history, captured in their credit score, and on the specific product. Anyone struggling with repayments can get free, impartial help: debt advice and MoneyHelper set out the options, and the Financial Ombudsman Service handles complaints about lenders that cannot be resolved directly.

Where to find the official figures

The average interest rates used on this page are based on average interest rate series published on the Bank of England website¹. Those series are the source for the interest on debt measures in the Household Costs Index, which tracks how price changes affect households' living costs¹. The Bank of England's Credit Conditions Survey, published quarterly, reports how lenders are changing the rates, terms and availability of unsecured credit, including the length of interest-free periods on new cards¹².

For who holds what, the FCA's Financial Lives survey is the main source: it found 65% of UK adults holding a credit card, 21% an overdraft and 14% a personal loan in 2024⁶. The Bank of England's statistics on lending to individuals split consumer credit into credit card lending and other lending, mainly overdrafts and other loans²⁷, and its household borrowing figures track the stock of debt over time. The Mortgage Policy Committee page covers who sets Bank Rate and when it meets, and Bank Rate history tracks every change.