Over 400,000 credit card holders paying too much interest

There is a Grinch with his eye on Christmas this year, as over 400,000 credit card users are paying more interest on their cards than necessary. That's according to a new report by the Central Bank of Ireland.

One can only shudder at the amount of unnecessary interest that could get racked up by shoppers over the festive period…

So why are so many of us overpaying on our 'flexible friends' and what can be done?

Why is it happening? 

In 2022, unbeknownst to many perhaps, new legislation capped the annual rate of interest that credit card companies could charge at 23%. However, the legislation wasn't applied retrospectively, so anyone with a pre-existing credit card carrying an interest rate above 23% has continued to pay high interest for no good reason.

And now a review by the Central Bank of Ireland has found that, of the approximately 1.3 million credit card accounts in Ireland, over 400,000 are still on rates above 23% that pre-date the legislation.

How did we get here?

During the lead-up to the implementation of the legislation, known as the Consumer Credit (Amendment) Act 2022, the price of credit in Ireland was among the most expensive in Europe (what’s new!) with some paying in excess of 28% interest on their credit cards annually. 

In an effort to reduce the strain on indebted households and modernise the credit industry in Ireland, a 23% cap was introduced.

There were some initial fears that credit would be harder to access as a result of the cap but those fears have proven incorrect. Increased competition has fuelled better offerings for the average consumer and if anything there's as much choice as ever for credit card customers.

What can be done today?

The Central Bank has urged credit card holders to shop around and see if there's a better deal available from their existing provider or else to switch to a lower rate with a new provider. It's also told credit card companies to improve their marketing efforts and make customers aware of the lower rates that they're legally entitled to as a lack of up-front communication about consumers' options was noted. 

Today, thanks to the previously mentioned increase in competition, there are plenty of rates far lower than the 23% maximum allowed, and of course, your favourite price comparison site has them all on offer right here! So, if you’re one of those people who is still paying sky-high interest on your credit card, don’t let the Grinch steal Christmas and switch today!

Here's a taste of what’s out there:

Taking some simple actions could result in real savings for consumers. If you are a credit card customer, there is no need to wait until you are contacted by your provider. Check your credit card statement now and see if your firm, or another, can offer you a better rate. For many of us, this is the biggest spending time of the year, and credit cards are an important part of the market in offering consumers payment choices – but don’t leave yourself paying more than you have to.

Director of Consumer Protection Colm Kincaid

Compare and switch

If you think you're paying too much interest on your credit card, then look at switching to a cheaper card as soon as possible.

With our credit card comparison service, you can review interest rates, balance transfer options, and card features from Ireland’s main credit card providers in just minutes.

And if you’re also looking for a new current account option, we recently wrote about which bank has the best value current account.  

Make sure you also check out our banking and personal finance comparison page to discover how you can lower your other everyday banking costs.