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Fewer 0% credit cards

It’s happening. Just as 100% mortgage deals vanished last year when the credit crisis really got going, the credit card equivalent - 0% interest deals - is now starting to disappear.

More from Trends and Analysis
12 November 2008

Fewer 0% Credit Cards

Fewer 0% Credit Cards

Ever more cautious lenders are expected to take their products off the market and the number of 0% products has already fallen dramatically.

Capital One has withdrawn its most popular balance transfer credit card from the market, heralding the beginning of the end for 0% interest deals.

UK consumers can still get great 0% offers from Barclaycard, Virgin and other companies but experts warn that it won’t be as easy to switch from one 0% deal to another in the coming months.

Ever more cautious lenders are expected to take their products off the market and the number of 0% products has already fallen dramatically with only 75% of all credit card companies still offering 0% deals. Last year, the around 82% offered this type of card.

How long a 0% interest deal will last has also seen a sizeable decrease over the last year, falling from 10.1 months on average to only 9.5 months.

Rate tarts

The credit crisis is the culprit, clearly, but another reason for the drop is the growing number of ‘rate tarts’ who move their debt between credit card companies to take advantage of their 0% offers.

The imminent death of ‘rate tarting’ is due to the declining chances of being accepted by new lenders as they tighten up their criteria in an effort to lend more responsibly and reduce risk.

Almost all the major players from Royal Bank of Scotland and Natwest through to Mint and HSBC have all began to stop promoting their 0% deals on comparison sites. This is the sort of move which signals to analysts that the companies are planning on removing these products all together.

Expert views

One expert said: “It’s going to become increasingly difficult to refinance your debt at 0 per cent interest.

“This trend away from extended balance transfer periods underlies a shift in the industry which is increasingly cautious about the people it lends to and is far more interested in the profitability of its customers.”

It’s not too late just yet though as deals are still attainable to those who move quickly. Virgin money recently released a card with a whopping 16 month interest free period and Egg is offering 0% interest until the first of February next year which is a good offer for those interested in a card for Christmas purchases.

Barclaycard and Tesco both still have cards of offer too; both of these give the customer 0% on interest for 14 months following a balance transfer.

Financial analysts are also saying that as the companies move away from balance transfer deals with 0% interest they will show that they are more interested in the 'profitability' of their customers, this will include the reassessment of lending criteria.

It also means that interest rates will rise. Over a year ago there were more than a few cards on the market which had lower interest rates than 10%, today you’re lucky if you can find a card lower than 16%.

Critics also say that credit card providers are trying hard to make money in tough times and they could lose out to pre-paid and debit cards if they aren’t careful.

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Best Buy Credit Cards

Credit Cards Balance Transfers Purchases APR Representative (Variable)
Tesco ClubCard Purchases Credit Card Logo Tesco Bank Logo Tesco ClubCard Purchases Credit Card Apply
9 months
2.9% fee
18 months
Representative Example: The annual purchase rate is 16.9% p.a (variable) so if you spend £1200 your representative apr will be 16.9% p.a (variable)
Barclaycard Platinum With BT (27 Mths) Logo Barclaycard Logo Barclaycard Platinum With BT (27 Mths) Apply
28 months
3.5% fee
6 months
Representative Example: The annual purchase rate is 18.9% p.a (variable) so if you spend £1200 your representative apr will be 18.9% p.a (variable)
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