HBOS cuts back on interest-free deals

HBOS has become the latest company to cut back its introductory credit card offers, in a move which may signal the beginning the of the end for 0 per cent interest deals.

The bank's "One" Visa card has been among the most competitive credit cards on the market for the past year, offering 0 per cent for 12 months on purchases and balance transfers. Having introduced a 2 per cent fee on all transfers, it has also slashed the interest-free period on purchases to just three months, and raised the subsequent normal APR by three percentage points to 15.9 per cent.

The move is the latest example of a credit card provider struggling to turn a profit on its new business, due to the intense level of competition in the market. Almost all providers charge a fee for balance transfers, something that was almost unheard of two years ago. Several providers including Barclaycard and Egg have also raised their standard interest rates recently.

A spokesman for HBOS said: "We've always said we'll price according to market conditions, and obviously there's been a lot of changes in the marketplace. We're still one of the most competitive cards in the market."

Andrew Hagger of Moneyfacts, the financial website, said: "This combination of a 0 per cent cutback and interest rate increase is another sign that even some of the bigger players ... are having to take action to claw back some of the costs associated with the credit card war and more recently the rising levels of personal bad debts".

This price restructure comes as no surprise, especially with a report this week from PricewaterhouseCoopers hinting that card companies may look to bring in annual card fees to provide a much-needed revenue boost. The report estimated that investors who skip between the 0 per cent credit card offers cost the industry up to £600m a year.