Credit Card Changes May Leave Uk Consumers Chafing

There have been two significant changes in the credit card
market in the UK The first is the sounding of the death knell
on zero percent deals The second is the government initiative
to end or significantly lower credit card charges on retailers
In the recent past, credit card companies habitually offered new
customers zero percent introductory interest deals Clients
could consolidate debts from other areas – other credit cards,
overdrafts, personal loans – and transfer them onto a credit
card with no interest to pay for anything up to a year A
customer with good financial discipline could move from deal to
deal and clear the debt sooner than if they were paying standard
interest rates Alternatively, they could make purchases with
other cards and then transfer the amount to the zero percent
card
The credit card companies benefited by making an up-front charge
for the transfer or because most customers did not have this
kind of discipline and would make purchases with their new card
Those purchases attracted higher interest rates and sometimes
further charges Companies helped matters along by supplying
customers with credit card cheques that attracted higher charges
on transfer although they also offered lower interest rates than
normal The interest rates were advertised where the charges
were not
Higher interest rates and the greater burden of credit in the UK
have led to an increased number of defaulters Like other
lenders, companies are feeling the pinch As a result, it seems
that fewer will be offering zero percent in future Instead they
will offer long term lower interest rates Again, they will be
gambling that consumers lack the financial discipline to control
their spending and additional interest or charges will accrue
Zero interest rates deals will be rarer and debt management
using cards more tricky
The other thing that will caused credit card companies to
tighten up is government pressure on companies to lower or
eliminate charges to retailers Retailers are charged one to two
percent per credit card transaction and in most cases are not
allowed to pass these charges onto customers The UK government
is now requesting that companies considerably lower or eliminate
charges While this is at the request stage, it would not be
surprising if they threatened to or actually brought legislation
forward to do this
This means that credit card companies are likely to switch to
charging customers more or raising interest rates again
Undoubtedly there will be attempts to making the charging regime
appear attractive by marketing additional services with the
cards – identity theft insurance, air miles, travel insurance
and so on But most of these ’services’ will rarely be used
What can you as the consumer do to combat these changes The
first thing to do is look now for cards that are guaranteeing
longer term lower interest payments and for companies that don’t
charge Second, if you do want a card offering additional
services and are prepared to pay a charge for them, make sure
they are services you will use repeatedly so that you get your
money’s worth As with any card make sure you know what the
credit card limit will be, what happens if you go over the limit
and what happens if you miss a payment In all of these areas,
some companies and deals come out better than others
Look for the Honesty Box to get a clear picture of what credit
card deals are really offering and how you can benefit from
them

Tags | card, charges, companies, consumers, feeling, financial, knell, lenders, market, percent, personal, pressure, sounding