Credit card lenders crack down on 'rate tarts'

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The Independent Online

Credit card borrowers who continually swap between 0 per cent introductory offers to avoid paying interest are facing a new range of charges designed to stop them transferring.

Tesco Personal Finance is the latest credit card lender to begin charging a fee to customers who want to transfer balances on to its 0 per cent offer. Borrowers will now have to pay 2 per cent of their balances to move to Tesco, subject to minimum and maximum fees of £2 and £35 respectively.

The charge is designed to discourage Britain's growing army of "rate tarts", credit card borrowers who run up large balances on their plastic but avoid all interest charges by continually moving their debt between 0 per cent deals. Because more than 50 lenders offer introductory interest-free periods, thousands of borrowers have been able to get away with paying no charges, even on sizeable debts.

Tesco's Stuart Neil said: "We want to be able to offer the majority of customers the best possible rates, but what we've ended up with is a small minority who move through the 0 per cent offer and everyone else has to pay for them."

Tesco is just the latest lender to introduce a fee, reducing the scope for credit card borrowers to exploit introductory offers. Barclaycard, Mint, Alliance & Leicester and MBNA have all imposed balance-transfer fees in recent months, with maximum switching charges of up to £50.

Samantha Owens, of Moneyfacts, the independent market analyst, said: "This time last year, lenders were clambering for customers to transfer their debt. They hoped consumers would maintain a balance and ultimately pay interest when their introductory period was up, but people have become more financially aware and lenders are getting little or no return."

Martin Lewis, of MoneySavingExpert, said: "Lenders are getting fed up. They are introducing fees to deter the rate tarts, or taking their best deals off the market." He said the charges would particular affect borrowers with smaller balances. "The maximum charge means that for people transferring more than £1,000, the impact is less serious, but for small transfers the fees destroy the value of an interest-free deal."

Very few lenders now offer 0 per cent balance transfers without fees. Those that do include Egg, Halifax, HSBC and Intelligent Finance.

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