The gloomy financial forecast for 2009 shows no sign of improving, if reports in the media are to be believed. Financial institutions are decidedly nervous going into the New Year. The latest Bank of England interest rate cut to the lowest in its 315 year history seems to have had little effect on calming monetary nerves and all reports indicate that the sun has finally set on the era of easy credit. However, consumers still want credit, and they want it at a good rate " preferably 0% for at least the first few months. Credit card companies are worried about exposing themselves to further potential bad debt, so are there still low rate cards available to those with the credit rating and the desire to keep spending on plastic?
The number of television adverts offering credit cards at 0% interest has been noticeable by their absence this year. Compared to 2008 (when many of us still believed that the recession was a dark and distant memory, unlikely to rear its ugly head again), there has been very little in the way of credit card temptations presented to a discerning public hungry for quick credit. This absence of availability has been backed up by findings from the organisation Credit Action, who concur that credit in general and low rate cards in particular are not as prevalent as they were 12 months ago. They also found that where credit was available, it was often more expensive than before. The findings suggest that the banks really are tightening up their criteria, making it more difficult for consumers to access credit in the first place.
However, the popularity of credit cards has not diminished and consumers are still on the lookout for a bargain. Chris Tapp, director of Credit Action says that credit cards are a very normalised part of the way people manage and borrow money, which means that its going to be very difficult to persuade consumers to stop using plastic. Add to this the fact that, although High Street sales may be crashing, online purchasing is on the increase with Ebay and other online auction sites seeing a continuing flurry of activity as customers hunt for bargains. All of these transactions (unless you have a PayPal account) are done on credit and debit cards. So the prospect of the British public turning their backs on their credit cards any time soon looks remote.
Leaving aside the question of 0% balance transfers and focusing purely on purchase rates, there are still some cards that give new customers a 0% grace period for a limited period. Once these 0% offers end though, the APR charged on some cards can sky-rocket, prompting an unseemly scramble by many consumers to start card jumping in the hunt for a 0% balance transfer deal. Frequent card jumping is a quick way to send your credit rating nose-diving " these days the lenders prefer customer loyalty to those who are good at playing the system. In the coming months we may start to see a battle between the leading card providers to keep their customer base stable, rather than going overboard to attract new customers, and that can be backed up by the noticeable lack of product promotion in January.
Rather than chasing after 0% shadows, credit card customers may be wiser to take a more pragmatic approach to this changing marketplace. To paraphrase the quotation, there are now three things certain in life " death, taxes and interest charges. Credit card customers may find that cards that do charge an APR are easier to access than the 0% offers, as the lenders know they will start to make money from the customer from the beginning of the financial relationship. The best thing customers can do is to look for a relatively low APR rate that doesnt contain any hidden extras such as compulsory insurance payments, handling fees or overpriced late payment fees. Consumers, like businesses, have to adjust their expectations to take into account the overall change in the financial markets.
The Internet has been of huge benefit to consumers in the brave new credit card world and online comparison sites have given the customer a control over the market that they never had before. They offer the smart consumer the chance to make an informed decision before choosing to apply for certain credit cards that may offer an enticing introductory package but have a nasty sting in the tail once the grace period is over. Credit card companies realise that the consumer is far more powerful than before as knowledge is power and the Internet provides that knowledge to a much more clued-in customer. There are still some excellent, low rate credit card deals to be had, but the market is now a much more symbiotic merging of credit lenders and customers.
The number of television adverts offering credit cards at 0% interest has been noticeable by their absence this year. Compared to 2008 (when many of us still believed that the recession was a dark and distant memory, unlikely to rear its ugly head again), there has been very little in the way of credit card temptations presented to a discerning public hungry for quick credit. This absence of availability has been backed up by findings from the organisation Credit Action, who concur that credit in general and low rate cards in particular are not as prevalent as they were 12 months ago. They also found that where credit was available, it was often more expensive than before. The findings suggest that the banks really are tightening up their criteria, making it more difficult for consumers to access credit in the first place.
However, the popularity of credit cards has not diminished and consumers are still on the lookout for a bargain. Chris Tapp, director of Credit Action says that credit cards are a very normalised part of the way people manage and borrow money, which means that its going to be very difficult to persuade consumers to stop using plastic. Add to this the fact that, although High Street sales may be crashing, online purchasing is on the increase with Ebay and other online auction sites seeing a continuing flurry of activity as customers hunt for bargains. All of these transactions (unless you have a PayPal account) are done on credit and debit cards. So the prospect of the British public turning their backs on their credit cards any time soon looks remote.
Leaving aside the question of 0% balance transfers and focusing purely on purchase rates, there are still some cards that give new customers a 0% grace period for a limited period. Once these 0% offers end though, the APR charged on some cards can sky-rocket, prompting an unseemly scramble by many consumers to start card jumping in the hunt for a 0% balance transfer deal. Frequent card jumping is a quick way to send your credit rating nose-diving " these days the lenders prefer customer loyalty to those who are good at playing the system. In the coming months we may start to see a battle between the leading card providers to keep their customer base stable, rather than going overboard to attract new customers, and that can be backed up by the noticeable lack of product promotion in January.
Rather than chasing after 0% shadows, credit card customers may be wiser to take a more pragmatic approach to this changing marketplace. To paraphrase the quotation, there are now three things certain in life " death, taxes and interest charges. Credit card customers may find that cards that do charge an APR are easier to access than the 0% offers, as the lenders know they will start to make money from the customer from the beginning of the financial relationship. The best thing customers can do is to look for a relatively low APR rate that doesnt contain any hidden extras such as compulsory insurance payments, handling fees or overpriced late payment fees. Consumers, like businesses, have to adjust their expectations to take into account the overall change in the financial markets.
The Internet has been of huge benefit to consumers in the brave new credit card world and online comparison sites have given the customer a control over the market that they never had before. They offer the smart consumer the chance to make an informed decision before choosing to apply for certain credit cards that may offer an enticing introductory package but have a nasty sting in the tail once the grace period is over. Credit card companies realise that the consumer is far more powerful than before as knowledge is power and the Internet provides that knowledge to a much more clued-in customer. There are still some excellent, low rate credit card deals to be had, but the market is now a much more symbiotic merging of credit lenders and customers.
About the Author:
Financial writer John Braveman writes posts for various financial and finance industry related websites. After many years experience working in the finance sector he is well versed in the 'dark arts' of credit card finance. You can read more about low interest rate credit cards here.
No comments:
Post a Comment