Card firms get tough on interest rates

The lenders are tightening the screws.

Hit by the cost of bad debt write-offs and the "rate tarts" who flit from one interest-free deal to the next without ever hanging around to repay the overtures of their suitors, a growing number of credit card lenders are curbing the 0 per cent deals. They are also pushing up their standard annual percentage rates (APRs).

HSBC is the latest to get tough, slashing from nine to six months its 0 per cent deal on purchases and balance transfers.

It has also raised the standard APR on this card from 13.9 to 14.9 per cent.

Fail to move any outstanding debt away to a new card by the end of the 0 per cent period, and you'll pay interest at this new, higher rate.

HSBC's move comes even though the Bank of England has not raised the base rate since last August.

An HSBC spokeswoman blamed the move on its need to protect its margins in the credit card market.

The bank's changes follow those made earlier this month by the Halifax, which chopped the 0 per cent deal on balance transfers for new customers from 12 months to three, and increased its standard APR for new purchases on the same card by 3 per cent (up to 15.9 per cent).

Tesco Personal Finance and John Lewis both announced increases to their standard APRs last month.

Robert Kenley from the price-comparison service Moneysupermarket.com said the changes were simply about profitability.

"Market conditions are becoming more challenging for the [card] issuing banks because of rising bad debt and increasing competition."

Financial figures last week from Barclays revealed that levels of bad debt provision had ballooned by 44 per cent.

Nick White from the price-comparison service Uswitch.com says these recent changes are the shape of things to come.

"The more traditional providers have been putting up their rates. I think more providers will follow - notching their rates up slowly."

For anyone looking to transfer expensive outstanding balances or debts, he recommends a card offering a low standard APR for the life of the balance transfer.

Intelligent Finance currently has a 4.9 per cent rate for the life of any balance transferred to the card within six months of the account being opened.

There's no transfer fee and customers still get eight months' 0 per cent interest on new purchases. But watch out: this rate then jumps to 16.9 per cent.