Money Insider: Credit card market: a tale of two borrower types

broadly speaking, credit card borrowers in the UK tend to fall into two distinct categories, based upon the way they've conducted their financial affairs.

For people with an excellent track record and blemish-free credit history there is a choice of interest-free balance transfer deals lasting up to a year and a half and an abundance of ways to earn cash back or reward points. If, on the other hand, you're struggling to keep your spiralling plastic habit in check and have exceeded your limit or missed a couple of payments along the way, then your choice of card is severely limited, best buy deals are out of bounds and the few options that may be available will be charging you upwards of 25 per cent APR.

If you fall into the former camp, the latest cards launched by MBNA during the last week provide fresh opportunities to benefit from extended interest-free credit or cash back.

The best-buy tables are brimming with deals to tempt creditworthy clients to switch allegiance from their existing flexible friends and the new 18-month 0 per cent balance transfer deal from MBNA is aiming to do exactly that.

For someone with a pristine credit record there is the opportunity to make your credit card work for you. For example, £2,500 transferred to the MBNA Balance Transfer card will cost just £72 for the one-off transfer fee (2.88 per cent), while if you borrowed that sum for 18 months at an average rate of 18 per cent APR, your interest bill would be more than £600.

If you've not got a balance to switch but are disciplined enough to repay your statement balance in full every month, then the new MBNA Visa Cashback card enables you to earn unlimited cashback at a market-leading rate of 1.25 per cent on your supermarket and fuel purchases and 0.5 per cent elsewhere.

A family spending £600 a month on the weekly shop and filling the car(s) will earn cashback of £108 over the course of a year – not a life-changing sum I know, but it takes no additional effort and it's money earned for making purchases that you'd be making anyway.

Lloyds TSB to team up with councils to boost first-time buyer lending

Lloyds TSB this week announced the launch of a new concept, entitled Local Lend a Hand, designed to help first-time buyers to purchase a home with a deposit of just 5 per cent. The initial pilot is being carried out in conjunction with local authorities in Blackpool, Warrington and Newcastle-under-Lyme, with a view to a full UK roll-out later this year.

Under the terms of the initiative, each local authority will agree which properties in their area will be available for first-time buyers under the new scheme. The first-time buyer will then be able to put down a minimum of 5 per cent of the property value and apply for a fixed rate Lloyds Local Lend a Hand mortgage for the remaining amount.

The local authority will provide extra security to the bank via an indemnity of up to 20 per cent of the property value, thus allowing the borrowers to benefit from interest rates far lower than they would normally experience for a 90 per cent plus LTV advance.

Unlike shared ownership schemes, the buyer will own the property in its entirety and the local authority for their part will receive interest on their 20 per cent stake, as well as having the opportunity to generate vital activity to support their local economy.

The number of new homes being built in this country is at its lowest level for decades, but with the Government recently allocating £950m to fund a new homes bonus initiative, perhaps joint ventures such as these with high-street lenders will enable councils to offer a ray of hope to those desperately seeking an affordable new home.

ISA frenzy as tax year deadline looms

Last week I reported that Barclays topped the ISA best buys with its new Golden ISA 3 with a rate of 3.25 per cent. However seven days on it's now quite a different picture.

Santander had originally priced its new Flexible ISA at 3.15 per cent, but has since upped the rate to 3.3 per cent to pip Barclays for the prime position.

However, the plan has since been scuppered by AA Savings with the launch of a new variable rate instant access ISA paying 3.35 per cent.

The level of consumer demand for high rate tax-free savings accounts was underlined this week when Skipton Building Society withdrew its 5 per cent fixed five-year deal after just 12 days, although it's not altogether surprising when you realise that the account was priced at a full 0.7 per cent above the next best deal from Northern Rock.

Andrew Hagger is an analyst at

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

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