Zero card rates for the chop as HBOS cuts back

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The HBOS One Visa card has been prominent in the best buy tables for more than a year, offering 0 per cent interest for 12 months on purchases and balance transfers.

But the interest-free period on this card was cut last week to just three months on purchases (the original 0 per cent deal remains for balance transfers). On top of this, HBOS has pushed up the interest rate it charges to new borrowers after this new three-month deal expires from an annual percentage rate (APR) of 12.9 to 15.9.

With the HBOS One Visa card, if you don't clear your balance in full, your monthly payments are allocated to pay off transfer balances with a 0 per cent interest rate before purchases charged at higher rates can be cancelled out.

This means your new, more expensive debt gathers interest because your cheaper debt is paid off first.

Halifax is not alone in putting up its rates. Barclaycard and Egg have also notched up their APRs in the past few months.

Andrew Hagger from financial analyst Moneyfacts says: "Halifax's move is another sign that even some of the big players are having to take action to claw back costs associated with the 0 per cent credit card war."

A new report from accountants PricewaterhouseCoopers hints that card companies may look to bring in annual card fees to provide a much-needed revenue boost.

"In the current climate, we're simply seeing card providers change the way they charge," says Richard Mason from the price comparison service

Mr Hagger predicts other lenders will be making similar changes "before too long".

A Halifax spokesman blames market conditions for its new, less generous deal, adding: "The market has changed but we are still competitive."

However, Nick White from, another price comparison service, says the move will see the Halifax card slip "from being a market leader to the bottom of the pile".

As alternatives, Mr Mason recommends HSBC's Mastercard, with 0 per cent on purchases and balance transfers for nine months (standard APR, 13.9), or MBNA's Platinum Plus, charging 0 per cent on balance transfer for nine months.

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