Competition in the credit card market is heating up, symptomatic of an economy that is slowly but steadily finding its feet again.
According to data released by Moneyfacts, in the last 12 month period, the number of providers offering zero interest purchases for at least 10 months shot up from just 2 to twelve, up by a whopping 450%. The number of 0% balance transfer credit card offers has also been on the up, rising by 20% from 60 to 72 in the same period.
With the economy in convalescence, the Moneyfacts data suggest that providers are feeling increasingly comfortable doing business, having taken the time to study the market dynamics. Its survey of the market shows a number of major players, including American Express, Barclaycard and Egg, to have also launched reward credit cards for their customers recently.
According to Michelle Slade, spokeswoman for Moneyfacts.co.uk, in an increasingly stable economy, the companies that cut back on their operation in the retail credit market are returning to the fray and card providers are actively trying to make up the lost ground.
But while this has meant an increase in the intensity of competition the market, the average interest rate charged on credit cards has risen to a high of 18.7%. And with the positive repayment order policy - a good-intentioned government directive that forces firms to use a customer’s debt payments to strike-off the debt with the highest interest rates - about to kick in from the next year, customers can expect to be charged even higher interests.
Ms Slade said that the firms are likely to recoup the revenue lost due to the positive repayment order by passing it on to the consumers in the form of increased interest rates and service charges.
According to the Moneyfacts market survey, those looking for best 0% interest deals on new purchases should look no further than Sainsbury’s Finance and Barclaycard, with cardholders being exempt from interest payments on any purchase for the first 12 months, following which a rate of 15.9% is levied. Tesco Bank and Virgin Money also offers a 12 month 0% interest period, but both charge comparatively higher rates afterwards.
In terms of 0% balance transfers deals, Clydesdale and Yorkshire Bank are leading the pack with 16 month 0% offer. Santander, NatWest and Royal Bank of Scotland and Barclaycard all come up second best with interest-free periods of 15 months.
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