Top Credit Card News

Derin Clark

Derin Clark

Online Reporter
Published: 04/02/2020

Fears that those in credit card debt could have their credit cards cancelled without warning were put at ease with this week’s announcement from the Financial Conduct Authority (FCA) that lenders needed to review their approach to persistent debt customers.

The FCA, a finance industry regulator, has instructed lenders to help those in a cycle of debt for at least three years by agreeing plans with customers to pay off their debts. As part of this requirement, lenders have been contacting customers to urge them to discuss repayment plans with their lender. However, it was feared that those in persistent debt could find that their credit card had been cancelled without warning, even if they had made repayment plans with their lender.

This week’s announcement from the FCA has stated that lenders would not be allowed to suspend a credit card without having an objectively justifiable reason, with the regulator highlighting concerns that lenders may cancel or suspend credit cards for everyone in persistent debt. In addition to this, the FCA has revealed concerns that customers may not respond to letters from their credit card provider, in which case it urged lenders to encourage customers to speak with them to discuss potential repayment plans and help find solutions if customers cannot afford the proposed repayments.

Commenting on this week’s announcement, Jonathan Davidson, executive director of Supervision for Retail and Authorisations at the FCA, said: “Under our rules, firms must help customers to reduce the level of debt they have on their credit card more quickly. If a customer cannot afford the firm’s proposals for how to do this, the firm must offer forbearance, potentially including reducing, waiving or cancelling any interest, fees or charges.

“My advice to consumers is don’t bury your head in the sand. If you can’t afford to meet the repayment schedule that the credit card firm is suggesting, don’t be afraid to tell them. If we find firms are not offering their customers the appropriate level of help, we will not hesitate to take action.

“If the firms do this right, we estimate that this could save customers up to £1.3bn a year in lower interest charges.”

Rachel Springall, finance expert at Moneyfacts.co.uk, added: “The FCA may well have thrown struggling credit card borrowers a lifeline today, as its warning could stop lenders from cancelling a credit card without a justifiable reason.

“There may well be borrowers out there who are keeping up with the minimum repayments but are unable to pay more each month, and these borrowers need support.

“Since the persistent debt proposals were announced, credit card providers have cut down the length of interest-free balance transfer offers, of which there is a record low amount of deals available now. Once the longest offer was for a 43-month interest-free balance term, while the longest today is just 29 months, a significant difference.

“Hopefully this interjection from the FCA will protect vulnerable consumers who need more guidance on ways to reduce their debts. However, if card providers are forced to reduce or abandon interest charges on debts, then this could impact the range of credit card deals that they are prepared to offer overall. It will be interesting to see what credit card providers will do in the months to come."

Borrowers wanting to transfer the balance on their credit cards will be pleased to see that Barclaycard and Sainsbury’s Bank have made their 0% balance transfer cards more competitive.

Barclaycard is now offering £20 cashback to customers who transfer at least £2,500 onto either of its Platinum 28 Month Balance Transfer Visa or its Platinum No Fee Balance Transfer Visa. Platinum 28 Month Balance Transfer Visa offers 0% interest for 28 months from the date of account opening and charges an introductory balance transfer fee of 1.75%, while its Platinum No Fee Balance Transfer Visa offers 0% interest for 18 months and has an introductory offer of no balance transfer fees.

In addition to this, Sainsbury’s Bank has extended the 0% interest term on its Dual Offer Credit Card Mastercard by five months and is now offering an interest-free term of 27 months. This card charges an introductory balance transfer fee of a 3.00%. While this card now has the longest term on a card that offers dual 0% balance transfers and purchases, those looking for the longest interest-free term on just balance transfers should consider Sainsbury’s Bank’s Balance Transfer Credit Card Mastercard. This card offers the longest interest-free balance transfer term of 29 months that is currently available in the 0% balance transfer chart. It charges an introductory balance transfer fee of 2.74%.

Figures released by UK Finance today show that consumers have reduced the amount spent on credit cards year-on-year, while debit card spending has increased.

According to the figures, during October 2019 consumers spent a total of £16.6bn on credit cards, which was a 2.7% drop on the total spent during October 2018. UK Finance also found that credit card debt grew by 3.3% during October 2019, which, although is a rise in debt, is significantly down from its recent peak of 8.3% at the start of 2018.

With many consumers facing high credit card bills after the festive period, along with the news that interest-free balance transfers deals are at a record low, we’ve analysed whether there are any 0% transfer deals worth applying for and how to choose the best one.

Consumers relying on interest-free balance transfer cards to pay off their credit card debt will be disappointed to find that the number of interest-free balance transfer deals have fallen to the lowest January level since records began in 2007.

Research carried out by Moneyfacts.co.uk has found that not only are interest-free balance transfer deals are at their lowest levels, but the length of these interest-free deals has fallen to a five-year low – offering the shortest average deal length since January 2015.

Indeed, Moneyfacts.co.uk has found that there are currently 76 credit cards deals that offer introductory 0% terms for balance transfers, down from 84 a year ago, 99 two years ago and 122 in 2017. In addition to this, back in January 2017 the top interest-free balance deal offered 43 months of 0% interest, while today the longest interest-free period is just 29 months.

Credit card market analysis 

  Jan 2017 Jan 2018 Jan 2019 Jan 2020
Average interest-free balance transfer term (days) 659 632 564 536
Longest interest-free balance transfer term card MBNA Limited - 43 months - 3.29% balance transfer fee Barclaycard - 38 months - 1.40% balance transfer fee MBNA Limited - 33 months - 1.99% balance transfer fee MBNA Limited - 29 months - 2.75% balance transfer fee
Number of interest-fee balance transfer deals 122 99 84 76
Average introductory balance transfer fee 2.31% 2.04% 2.32% 2.27%

Longest interest-free deals exclude cards with an admin fee. 

Commenting on the research, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The start of a new year could spell a rise in demand for interest-free balance transfer credit card offers, but the number of offers has hit a record low this month. There are now just 76 deals on the market that offer a 0% introductory term for balance transfers, a stark contrast from January 2017 when there were 122.

“Lengthy offers have declined as well and today the top card has a 0% balance transfer term of 29 months (MBNA), a staggering drop of 14 months compared to the top deal in 2017 of 43 months (MBNA). In fact, based on all these interest-free balance transfer cards, borrowers have around four months less on average to pay back their debt before interest applies than they did in 2017.

“The cost to move debt is also more expensive based on the top deal on the market today compared to 2019, as consumers would need to pay £22.80 more in upfront fees. Borrowers would also have to pay an additional £12 a month to clear a core debt of £3,000 within 29 months, compared to if they had grabbed the 33-month offer last year.

“Those consumers who used a credit card to pay for some of the festive season may be looking to acquire a 0% balance transfer card, but if they do then they would be wise to make fixed repayments. For instance, someone with a £3,000 debt that paid £150 back as a minimum per month would clear the debt in 20 months, but there are cards that can default to a repayment of just 1% plus monthly interest – so their debt would hang overhead for much longer on this basis.

“Clearly, the lengthy interest-free balance transfer offers have undergone a transformation as providers changed their ranges in response to the Financial Conduct Authority’s persistent debt ruling. Consumers struggling with debt would be wise to seek advice, particularly as their card could be suspended if they have been paying more in interest and charges than the original debt.”

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