Somewhere between the Bank of England holding its base rate at 3.75% and the average credit card now charging close to ten times that figure, a lot of people carrying a balance have quietly become much poorer without a single letter from their bank explaining why. According to Moneyfacts' UK Unsecured Lending Trends Treasury Report, the average credit card purchase APR reached 35.7% in June 2025 — the highest figure recorded since Moneyfacts began tracking the market in June 2006, up from 35.3% a year earlier and 31.2% back in June 2023. Finder's ongoing tracking of the same market puts the average even higher by May 2026, at 36.81%, and the monthly figures haven't dipped below 36% since January. Meanwhile, the best personal loan rate on the market this month, HSBC's Premier Loan at 5.7% APR, is barely above where best-buy personal loan rates were sitting two years ago. Two products that most people mentally file under "borrowing money" have quietly stopped behaving like the same market at all, and almost nobody carrying a card balance has actually sat down and worked out what that split is costing them. This is what the numbers actually show, and what to do differently because of them.
Two lending markets, moving in completely different directions
The Bank of England's own Money and Credit statistics for April 2026 make the split explicit rather than anecdotal. The effective interest rate charged on new personal loans to individuals rose slightly to 9.53% in April, up from 9.09% in March — a small move, consistent with a market that has stayed roughly flat for two years. Over the same month, the effective rate on interest-charging credit cards actually fell, from 21.63% in March to 21.20% in April. That 21.20% figure is the Bank's own measure of what people who carry a balance are actually paying, and it sits nowhere near the 35–37% advertised APRs quoted by comparison sites — because the effective rate blends promotional 0% periods, low-rate cards and standard cards together, while the advertised APR reflects what a new applicant is quoted today. Both numbers matter, and they tell slightly different stories: existing cardholders on older deals are, on average, paying less than new applicants would be quoted right now. Annual growth in total consumer credit slowed to 8.8% in April, and within that figure credit card borrowing growth eased to 11.8% from 12.3% the month before, which suggests some households are already pulling back rather than adding to card balances at these rates. Net borrowing through other consumer credit — car finance and personal loans mainly — actually fell in the same month, from £1.2 billion in March to £1.0 billion in April, while credit card borrowing edged up from £0.7 billion to £0.8 billion, which is an odd combination if cards really are the more expensive option on paper.
What hasn't moved is the personal loan market's basic pricing structure. Moneyfacts' Rachel Springall noted that pricing has been "a delicate balance for lenders, considering their appetite to risk as cost of living pressures remain, alongside the need to entice new business" — which is a polite way of saying lenders are competing hard for low-risk borrowers while leaving everyone else roughly where they were. The current best-buy table bears that out: HSBC Premier Loan at 5.7%, M&S Bank at 5.9%, First Direct at 5.9%, Nationwide Building Society at 5.9%, Tesco Bank's Clubcard-linked loan at 6.0%, and TSB at 6.1%, all for borrowers with excellent credit taking out five-figure sums over three to five years. Drop below that tier — smaller loans, thinner credit files — and the picture worsens quickly, with providers like 118 118 Money and Admiral pricing well into double digits for the same product type.
The maths that most people never actually run
Do the arithmetic once, and the case makes itself.
Take a fairly ordinary case: £5,000 sitting on a credit card at the current average purchase APR of roughly 35.7%, paid off only via minimum payments. On most UK card agreements the minimum is calculated as a small percentage of the balance plus that month's interest, which means the early payments are doing almost nothing to the principal. Clear the same £5,000 instead with a three-year personal loan at TSB's published example rate of 6.9% APR on smaller sums, and the total interest bill drops from a figure that can exceed the amount originally borrowed to a few hundred pounds, spread over fixed monthly payments that actually end on a known date. Run the same comparison at £10,000 over five years and the gap widens further: a M&S Bank loan at 5.9% APR costs £11,529 in total, according to Which?'s own repayment tables, against a card balance at the average purchase rate that would still be growing rather than shrinking under minimum payments alone. That's not a marginal improvement — it's the difference between debt that shrinks on a schedule and debt that barely moves no matter how many payments go in.
Moving that balance to a personal loan is, for almost anyone with a credit score good enough to qualify, the better choice. Don't keep a card balance sitting at 30%+ APR out of inertia or because switching feels like admin — it is a few minutes of paperwork against thousands of pounds over the life of the debt. The one group this doesn't apply to cleanly is anyone within a genuine 0% introductory period who is confident of clearing the balance before it reverts; in that specific case, the card is still cheaper, and a personal loan with an arrangement fee would be a step backwards.
Why the rates have split this far apart
Credit cards are unsecured, revolving and available to a far wider band of credit profiles than a bank's best personal loan rate, which mostly goes to existing current-account customers with a clean history. Lenders price that flexibility and that risk spread into the advertised rate, and because only 51% of successful applicants legally need to be offered the headline "representative" APR, plenty of approved customers end up on something considerably worse than the number in the advert. Personal loans, by contrast, are underwritten individually before the money moves, with the lender already knowing the exact amount, the term and the borrower's file — there's less unpriced risk sitting in the product, so the rate can sit closer to the Bank's base rate without the lender taking on the same tail risk a revolving credit line carries.
A handful of standard credit cards still undercut the market average by a wide margin, which is worth knowing even if it doesn't change the broader picture. MBNA's Low Rate card advertises a representative APR of 14.9% for eligible applicants, the lowest standard-card rate currently on the UK market, while Halifax's Clarity card charges a representative 23.9% with no fee for spending abroad — both well under the 35.7% average, and both worth checking before assuming every card is priced the same. Barclaycard's Rewards card sits at 27.9%, still below average but not in the same league as MBNA's offer.
What the Bank of England's next move could change
The Monetary Policy Committee held Bank Rate at 3.75% at its 30 July meeting, on a 6–3 vote, with three members pushing for an increase rather than a cut — a split that would have seemed unlikely a year ago, when the direction of travel was assumed to be downward. CPI inflation had fallen to 2.6% in June, only for the disruption to oil and gas transport from the conflict in the Middle East to push the following reading back up toward 3.5%, complicating any near-term case for cheaper borrowing. The next decision lands on 17 September 2026, and most of the market forecasters surveyed expect a hold rather than a move in either direction. None of this touches credit card pricing directly — card APRs have kept climbing steadily since 2022 regardless of what Bank Rate has done in either direction, which is itself the clearest sign that the two markets are no longer reacting to the same signal the way they once did.
What to actually do about it this month
For anyone weighing up a bigger purchase or an existing balance right now, the practical takeaway doesn't really depend on guessing which way the MPC goes in September. A fixed personal loan locks in today's rate regardless of what happens next, while a card balance left untouched keeps accruing at whatever the issuer decides to charge — and issuers have shown no particular urge to bring that number down even while the base rate sat flat for months. Start by checking your own card's actual APR against the 35.7% average rather than assuming you're paying anything close to it; providers ranging from a 14.9% low-rate card to a 40%+ store card can both be technically "average" once blended across the whole market. Then compare that figure, in pounds rather than percentages, against a fixed-rate personal loan quote for the same balance over a term you can actually commit to.
- Pull your current card's representative APR from your last statement, not the advert you originally signed up for — many cards reprice after an introductory period ends.
- Get a personal loan quote through a soft-search eligibility checker before applying properly, so shopping around doesn't dent your score.
- If you're offered a rate above the lender's advertised representative APR, ask why — you're allowed to, and it sometimes reveals a fixable error on your file.
- For balances you genuinely can't consolidate, at minimum move off a standard card and onto MBNA's or Halifax's lower-rate options, among a small number of similar deals worth comparing directly.
The only number that matters, in the end, is the one on your own statement — not the market average, not the base rate, and not what your card cost when you first applied for it.