Yahoo Finance Credit card market feels the crunch as top deals disappear
Choice in the credit card market is being squeezed as providers take a more cautious attitude to lending, following warnings over excessive consumer spending.
Research by financial analyst Moneyfacts shows the number of interest-free purchase cards on the market has dropped by 14pc in the past year, while 0pc balance transfer cards have fallen by 21pc.
The Bank of England has repeatedly expressed concerns about the level of consumer debt in the UK. Customers are also holding this debt for longer.
Research from the Financial Conduct Authority (FCA) has shown that affluent borrowers are more likely to be incurring debt on 0pc cards than those on low incomes.
Charlotte Nelson, of Moneyfacts, said credit card providers started to pull some of their top 0pc balance transfer cards last year and that some of the most attractive 0pc purchase cards were now disappearing.
“There are growing concerns from the Bank of England that borrowers are getting themselves in a spiral of debt,” she said. “Providers have wanted to show that they have listened to these worries and have started to reduce the interest-free terms on their deals.”
Matt Sanders, of comparison website GoCompare, said that there were still good deals available for borrowers.
“Introductory 0pc periods have been slowly getting shorter across the board,” he said.
“However, there is still a range of 0pc purchase cards on the market offering periods of up to 30 months – but these rates are likely to be reserved for those with the best credit ratings.”
Halifax, MBNA, nuba and Virgin Money all currently offer 30-month fee-free cards, although this is shorter than the 32-month offers that were available last autumn.
Additionally, the top interest-free balance transfer card has fallen from 43 months in April 2017, to 36 months now.
Other rules are also having an impact on the wider credit card market. Last week Telegraph Money reported how EU rules that cap the fees card companies can charge to retailers have ecimated the market for rewards credit cards.
Separate rules from the FCA, intended to tackle persistent credit card debt, could also add to the pressure on the market in coming months.
In February, the City regulator criticised banks and other card companies for failing to support customers with large debts.
Providers have until Sept 1 to be compliant with the new rules, and Miss Nelson said lenders would assess all these factors when deciding their product ranges for the rest of the year.
“The FCA’s new rules will keep the momentum of the decline of the interest-free deals,” she warned.
However, despite concerns over consumer debt, Mr Sanders said that interest-free purchase cards were still a valuable tool for consumers.
“Interest-free credit cards can be a good way to spread the cost of a large purchase, such as a holiday or car insurance policy, allowing you to set your own repayment schedule,” he said.
“This helps to make your purchase more manageable, while also freeing up your existing capital – which might be better spent, or invested elsewhere.
“Also, you will benefit from the Consumer Credit Act if anything goes wrong with your purchase. This essentially covers you on purchases up to £30,000, meaning the card company has equal liability with the seller if there’s a problem after sale.”
