Finance Choices
UK Credit Card customers aren't tarts
New research shows that the UK is not a nation of 'rate tarts', with credit card holders staying with their provider for over six years before switching.
Today Morgan Stanley's credit card index has shown that, while increasing numbers of credit card companies are adding fees to their zero per cent balance transfer deals, most consumers in the UK are not taking these deals.
The card provider discovered that just eight per cent of the UK's 30 million cardholders are looking for a new deal in the next three months. Of the people who have switched credit cards in the last month, the average 'rate tart' has been with their card company for almost six and a quarter years.
And just 19 per cent of those who have recently applied to change have been with their card provider less than two years.
"Our research suggests that cardholders are wising up to short-term deals, as the majority of those currently switching or planning to switch are not moving from one short-term offer to another," said Patrick Muir, marketing director, Morgan Stanley Consumer Banking.
The card provider found that people who said they were likely to change their provider had on average been with their credit card company for four and a half years.
But this research comes as lenders increasingly act to try to stop the losses that a minority of card switchers are inflicting.
Merlin Stone of the Bristol Business School recently calculated that consumers are taking £1 billion a year from lenders by utilising zero per cent credit card balance transfers.
"Card issuers will increasingly look to find other ways in which to differentiate, the most obvious being the introduction of flat rates of interest," he commented.
Samantha Owens, of financial comparison service Moneyfacts, said: "This time last year credit card companies were clambering for customers to transfer their debt. At this time charges for balance transfers only affected a few cards. Now there are an increasing number of providers in the market going down this route."
There are some free balance transfer credit cards still available however. To find some of the better ones have a look at our credit card comparison service
Babs
Today Morgan Stanley's credit card index has shown that, while increasing numbers of credit card companies are adding fees to their zero per cent balance transfer deals, most consumers in the UK are not taking these deals.
The card provider discovered that just eight per cent of the UK's 30 million cardholders are looking for a new deal in the next three months. Of the people who have switched credit cards in the last month, the average 'rate tart' has been with their card company for almost six and a quarter years.
And just 19 per cent of those who have recently applied to change have been with their card provider less than two years.
"Our research suggests that cardholders are wising up to short-term deals, as the majority of those currently switching or planning to switch are not moving from one short-term offer to another," said Patrick Muir, marketing director, Morgan Stanley Consumer Banking.
The card provider found that people who said they were likely to change their provider had on average been with their credit card company for four and a half years.
But this research comes as lenders increasingly act to try to stop the losses that a minority of card switchers are inflicting.
Merlin Stone of the Bristol Business School recently calculated that consumers are taking £1 billion a year from lenders by utilising zero per cent credit card balance transfers.
"Card issuers will increasingly look to find other ways in which to differentiate, the most obvious being the introduction of flat rates of interest," he commented.
Samantha Owens, of financial comparison service Moneyfacts, said: "This time last year credit card companies were clambering for customers to transfer their debt. At this time charges for balance transfers only affected a few cards. Now there are an increasing number of providers in the market going down this route."
There are some free balance transfer credit cards still available however. To find some of the better ones have a look at our credit card comparison service
Babs
posted by Barbara Gordon at 1:12 PM
UK Credit Card customers aren't tarts
5 Comments:
You can still pick up some good deals on credit cards if you look around.
A Credit Tart and Proud :)
I suddenly realised the other day that, since I started playing the 0% credit card game last summer, I've accumulated enough spare credit to pop into a garage showroom and buy myself a brand new family-sized car.
You know the game I mean? For example, I financed some home improvements last year with the use of a 0% credit card (Card One) and when the six-month deal finished I promptly applied for a new 0% card (Card Two) so I could switch the balance and continue borrowing the money interest free. The introductory period on Card Two has now finished so I've just switched the remaining debt for a third time.
I now owe far less than the original amount that I borrowed last summer because I have been paying it off - the debt has just been through three different cards so far - all of them interest-free. However, I now have three credit cards with a combined total credit limit of £22,000 - which is why I could nip down the road and buy myself a brand new car if I wanted to.
I don't know about you but I find that quite scary. What happens if I have a sudden mental aberration and decide to go on a spending spree! And, more to the point, if in nine months' time I still haven't finished paying off my home improvements and I need to switch the balance to a fourth card, will my credit file look a bit suspicious?
When a credit check is run on your file, the searcher sees exactly how many credit cards you've got, the amount of credit that's available to you and the balances you've got on each of them. They're not just looking to see if you have missed payments or defaulted enough to warrant a County Court Judgement - they also want to know if you've got lots of cards and loans and, in particular, a lot of available credit not least because they're concerned about people having mental aberrations too!
The trick, of course, is to cancel the first two credit cards and close the accounts so they're removed from my file. And you should do the same if you have a whole collection of cards that are gathering dust. You never know, in a year or two, you might even qualify for introductory offers from cards you've had in the past as you'll be considered a new customer!
It's a nice game if you can play it but most of the credit cards I've seen seem to be cutting back on the 0% introductory offers.
Some just do a balance transfer, then invest the cash and earn interest from it - I know a few people who do it, and with a few cards on the go at once, they earn a fair bit.
Yes i know a few people who do it. You do have to be very careful though incase you mess up and go over the 0% period for whatever reason or there's a good chance you'll wipe out any profits you've made on interest.
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