2008 turned out to be the year when the financial chickens came home to roost, and its looking increasingly like 2009 will be a continuation of an economic freeze. Financial institutions are nervous, and even the lowest base rate of interest in the Bank of Englands 315-year history has done little to calm a jittery financial market. The common consensus is that the heady days of easy credit are over. However, consumers are still hungry for good credit card deals and have become accustomed to 0% offers and low APR on credit cards. Credit card companies are worried about exposing themselves to bad debt, so are there still low rate cards available to the clever consumer?
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 continues unabashed and consumers are still on the lookout for a bargain. Chris Tapp, director of Credit Action says that credit cards are an integral part of the way people manage and borrow money and are a very normalised part of everyday life. This means that its going to be very difficult to persuade people to give up their plastic, even in the face of a recession. Added to this is the continuing march of the dominance of Internet sales over high street sales. Online purchasing is on the increase with Ebay and other online auction sites busier than ever as customers hunt for bargains. All of these transactions are done on credit and debit cards (unless you have a PayPal account), so the prospect of the British public turning their backs on credit cards in the near future is remote.
There are still some cards out there that do offer a 0% grace period on purchases, although many of these grace periods are much shorter than before. 0% balance transfer offers are still relatively plentiful, but even their criteria have been tightened. Once these 0% honeymoon periods are over, the APR on purchases can rise rapidly (usually around the 18% level) and this can prompt many customers to start card jumping in the hunt for a 0% transfer deal. Frequent card jumping is a quick way to send your credit rating down, as card providers are looking to consolidate their customer bases rather than add to them. To them, the 2009 buzzword is 'loyalty, not liquidity. In the coming months we may see a credit industry that tries to stabilise its position rather than going overboard to attract new customers. The lack of product promotion in January points to this groundshift.
Rather than chasing illusive 0% deals, 2009 credit card customers would be better placed to accept that, along with death and taxes, credit card interest payments are inevitable and look for the best deals they can find. This includes not only the APR of the card, but any additional fees that a customer may incur such as insurance, handling fees, late payment charges and other hidden extras. The consumer has to realize that the days of free and easy lending are over and has to adjust their expectations accordingly. After all; if businesses have to bend to the financial wind, so do consumers.
The Internet has its part to play in the brave new credit card world, and online comparison sites are coming into their own. They give the smart consumer a chance to make an informed decision before they leap blindly into the offer that seems to promise the most financial bling but may have a hidden sting in its tail once the honeymoon period is over. Credit card companies are realizing that there is a groundshift in the marketplace and that, despite the dire financial warnings issued almost daily, the consumer is very much in charge this time around. There are still low rate credit cards to be had, but it all has to be part of a much more symbiotic relationship between customers and credit card companies. - 16928
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 continues unabashed and consumers are still on the lookout for a bargain. Chris Tapp, director of Credit Action says that credit cards are an integral part of the way people manage and borrow money and are a very normalised part of everyday life. This means that its going to be very difficult to persuade people to give up their plastic, even in the face of a recession. Added to this is the continuing march of the dominance of Internet sales over high street sales. Online purchasing is on the increase with Ebay and other online auction sites busier than ever as customers hunt for bargains. All of these transactions are done on credit and debit cards (unless you have a PayPal account), so the prospect of the British public turning their backs on credit cards in the near future is remote.
There are still some cards out there that do offer a 0% grace period on purchases, although many of these grace periods are much shorter than before. 0% balance transfer offers are still relatively plentiful, but even their criteria have been tightened. Once these 0% honeymoon periods are over, the APR on purchases can rise rapidly (usually around the 18% level) and this can prompt many customers to start card jumping in the hunt for a 0% transfer deal. Frequent card jumping is a quick way to send your credit rating down, as card providers are looking to consolidate their customer bases rather than add to them. To them, the 2009 buzzword is 'loyalty, not liquidity. In the coming months we may see a credit industry that tries to stabilise its position rather than going overboard to attract new customers. The lack of product promotion in January points to this groundshift.
Rather than chasing illusive 0% deals, 2009 credit card customers would be better placed to accept that, along with death and taxes, credit card interest payments are inevitable and look for the best deals they can find. This includes not only the APR of the card, but any additional fees that a customer may incur such as insurance, handling fees, late payment charges and other hidden extras. The consumer has to realize that the days of free and easy lending are over and has to adjust their expectations accordingly. After all; if businesses have to bend to the financial wind, so do consumers.
The Internet has its part to play in the brave new credit card world, and online comparison sites are coming into their own. They give the smart consumer a chance to make an informed decision before they leap blindly into the offer that seems to promise the most financial bling but may have a hidden sting in its tail once the honeymoon period is over. Credit card companies are realizing that there is a groundshift in the marketplace and that, despite the dire financial warnings issued almost daily, the consumer is very much in charge this time around. There are still low rate credit cards to be had, but it all has to be part of a much more symbiotic relationship between customers and credit card companies. - 16928
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.
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