The Bank of England base rate is the interest rate they charge when it lends money to other banks. This rate matters because it influences how much we all pay to borrow - whether it’s for a mortgage, a personal loan, or your credit card.
For example, if you have £2,000 on a credit card at 20% APR and the bank increases your rate by just 0.25%, that’s about £5 more in interest over a year - without you spending a penny more. It might not sound like much, but over time, and especially on bigger balances, these changes add up.
When the Bank of England base rate goes up
If the Bank of England raises the base rate, borrowing (BNPL, credit cards, loans... all of them!) usually gets more expensive. Banks may increase the interest rates on their credit cards, which means the credit card debt interest you pay could go up too.
If you carry a balance from month to month, even a small rise in APR (annual percentage rate) can make your debt more costly. You’ll pay more in interest and it could take longer to clear your balance if you keep making the same monthly payments.
What happens if it goes down?
If the base rate drops, borrowing becomes cheaper for banks. In theory, they could pass these savings on to customers - but credit card rates don’t always fall straight away, and sometimes they don’t change at all.
Even if your credit card debt interest doesn’t drop, a lower base rate can be a good time to shop around for better deals, like balance transfer offers or cheaper personal loans.
What you can do
- Check your current rate: Knowing your APR means you can quickly spot changes.
- Pay more than the minimum: This will cut your credit card debt interest, no matter what the base rate is.
- Compare other options: If your rate goes up, see if you can move your balance to a cheaper card or loan.
Bottom line: Changes to the Bank of England base rate can make your credit card debt interest rise or fall. Paying off your balance faster and keeping an eye on your APR is the best way to protect yourself from rate changes.
