Credit card firms ready to do business again

More 0 per cent deals are in the offing, says Chiara Cavaglieri

After more than two years in the doldrums, it seems the credit card market is gearing back up, with a marked increase in the number of cards offering a 0 per cent rate to get people to transfer their balances. Are consumers really facing an easier time of it, or should they be watching out for pitfalls?

"Providers now feel ready to do business again in the current economic conditions and are actively trying to attract new customers," says Michelle Slade from comparison site

At the start of 2010, there were a measly three cards offering a 0 per cent introductory deal on purchases of 10 months or more. Today, that figure stands at 11. Similarly, the number of cards offering 0 per cent for 10 months or more on balance transfers has shot up from 64 to 72. Among the new deals launched this year, stand-outs include Virgin Money's 12/12 MasterCard which offers 0 per cent for 12 months both on new purchases and balance transfers, as well as the 16-month 0 per cent balance transfer deal from Yorkshire Bank and Clydesdale Bank launched in May.

Consumers have also been tempted with improved offers from lenders including an extra two months at 0 per cent on the Barclaycard Platinum purchase card and an extension for Halifax All in One MasterCard users from 9 to 10 months at 0 per cent on balance transfers and new purchases. Despite the new and improved offers, however, providers are still operating very tight lending strategies and only applicants with a squeaky clean record are getting the nod on the best buys.

"Credit card providers are really focusing on the credit quality of their lending and, in many cases, this means existing customers," says David Black from financial analysts Defaqto.

Although 0 per cent deals are on the up so are interest rates on new purchases. The average rate now stands at 18.7 per cent APR; since the beginning of the year, several providers have upped their rates including Capital One Bank by 5 per cent, Sygma Bank by 2 per cent and Egg by 1 per cent.

Consumers can expect this trend to continue once new rights for credit and store card users take effect at the end of the year. The most notable of these new rights concerns payment hierarchy – the order in which credit card users pay off different forms of debt. Currently, with the exception of Nationwide, Saga and the Co-operative Bank, most lenders operate a negative payment hierarchy. This means that they repay the cheapest debt first, typically the 0 per cent deals, leaving more expensive interest such as purchases and cash withdrawal until last so that they accrue more interest.

From 2011, providers will have to use repayments towards the most expensive debt first.

"The US has already made these changes and as a result they have seen charges such as balance transfer fees rise to about 5 per cent. In the UK the average balance transfer fee is 3 per cent, but I'm sure this will be one of the first things to be hiked," says Andrew Hagger from

To avoid being stung in the meantime, consumers are advised to have a separate card for balance transfers and for purchases. Alternatively, opt for a credit card which is already operating a positive payment hierarchy such as the Nationwide credit card.

Other top tips include avoiding cash withdrawals which can attract rates of nearly 30 per cent plus a typical fee of 3 per cent. This is even more important for overseas withdrawals as some cards will charge an additional foreign currency loading fee of between 2.75 per cent and 2.99 per cent. The Post Office, Saga and Santander have cards charging no interest worldwide, while Nationwide BS makes no charge in the EU.

"Gambling transactions and transfer of funds from your credit card to your bank account (which are known as money transfers) are also treated as cash and attract a fee of between 3 per cent and 4 per cent," warns Mr Hagger.

Expert View

Michelle Slade, Moneyfacts

"Deals on cards will remain on offer to attract new customers in the hope they will make money from the interest charged at the end of any introductory deal.

"However, when one revenue stream closes for card providers they will find another way to recoup the loss. Rates have already started to increase, with more providers likely to follow suit when they change over to a positive repayment hierarchy. We may also see other charges increasing or being added, such as foreign or low-usage fees."

Life and Style
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
Luis Suarez looks towards the crowd during the 2-1 victory over England
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Junior Research Analyst - Recruitment Resourcer

    £18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

    Senior Analyst - Financial Modelling

    competitive: Progressive Recruitment: This really is a fantastic chance to joi...

    Associate CXL Consultant

    £40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

    Business Anaylst

    £60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

    Day In a Page

    Backhanders, bribery and abuses of power have soared in China as economy surges

    Bribery and abuses of power soar in China

    The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
    Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

    Highland terriers steal the show at opening ceremony

    Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
    German art world rocked as artists use renowned fat sculpture to distil schnapps

    Brewing the fat from artwork angers widow of sculptor

    Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
    BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

    BBC takes viewers back down memory lane

    The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
    Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

    Nicolas Cage shines in low-budget drama Joe

    Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
    How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

    Make your own ice lollies and frozen yoghurt

    Think outside the cool box for this summer's tempting frozen treats
    Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

    Fiesta is UK's most popular car of all-time

    Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
    10 best reed diffusers

    Heaven scent: 10 best reed diffusers

    Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
    Commonwealth Games 2014: Female boxers set to compete for first time

    Female boxers set to compete at Commonwealth Games for first time

    There’s no favourites and with no headguards anything could happen
    Five things we’ve learned so far about Manchester United under Louis van Gaal

    Five things we’ve learned so far about United under Van Gaal

    It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
    Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

    Screwing your way to the top?

    Good for Lana Del Rey for helping kill that myth, says Grace Dent
    Will the young Britons fighting in Syria be allowed to return home and resume their lives?

    Will Britons fighting in Syria be able to resume their lives?

    Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
    Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

    Beyoncé poses as Rosie the Riveter

    The wartime poster girl became the ultimate American symbol of female empowerment
    The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

    The quest to find the perfect pair of earphones

    Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
    US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

    Meet the US Army's shooting star

    Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform