Price war predicted for credit card lending

Credit card experts are expecting a new year price war to break out as lenders try to cash in on Christmas spending.

Several leading credit card lenders have already launched special offers designed to persuade borrowers to switch their debts away from their existing credit cards.

Mint, the credit card company owned by Royal Bank of Scotland, fired an early shot in the plastic price war yesterday. It is offering new customers interest-free credit for up to 18 months.

The deal includes a 0 per cent interest rate on both balances transferred from other cards and new spending until November 2006, plus a further six months interest-free on new debts transferred to the card in January 2007.

The more competitive offers follow predictions of a significant increase in consumers' Christmas spending. Apacs, the group that runs Britain's electronic payments network, is forecasting consumer spending in December will hit £48.7bn, up 10 per cent on last year. It expects the total to include £11bn of credit card spending.

Nick White, the head of personal finance at the price comparison service Uswitch, said: "January is traditionally the time when competition hots up in the credit card market, with new low-rate deals launched in an attempt to attract indebted consumers to move their debt to them."

HSBC, the high street bank, has improved the terms on its credit card deal, as part of a retailer-style "sale" of its products that was launched on Tuesday.

As part of the initiative, which has been pioneered by HSBC's widely regarded head of personal financial services, Joe Garner, it is extending an existing nine-month interest-free credit card offer by a further 35 days if borrowers open an account during January.

In addition, while Barclaycard, the UK lender, has yet to announce a new year deal, it is a joint partner in the launch of the SkyCard, a new credit card that is branded as a product from BSkyB, the satellite television broadcaster.

The SkyCard is targeting existing borrowers with 12 months of interest-free credit on balances transferred from rival lenders.

Richard Mason, the director of credit cards at the price comparison service Money Supermarket, said many of the new deals were aimed at those who had sharply increased borrowing during December.

"[They] will be attractive to anyone who has overindulged on their spending during the Christmas period and is looking to switch their debt to an interest-free card," he said.