Recession causes change in Credit Card trends
The credit card industry has seen many changes throughout the last quarter of 2008 to present, largely due to the credit crunch. Although providers have become more selective over who they will approve credit to, the market has seen an increase in competition over the last 2 months which has led to improved deals and in turn increased consumer appetites for making use of credit cards.
However, these attractive offers are more frequently being made available to existing customers only, for example, the Natwest Platinum and RBS Platinum Credit Cards increased their balance transfer durations from 13 months to 15 months, an offer available to their current account customers only.
This allows providers to lower the risk as they can make an assumption as to whether a customer can be trusted with credit based on previous history.
Sam Gooch, Credit Card Analyst at Which4U said: “In order to expose yourself to the best 0% credit card deals in the market, it may be a canny strategy to open several current accounts across a number of institutions.
“This will allow you to qualify for competitive deals that require consumers to be an existing customer as they are launched – after-all, most bank accounts are free to open, so there’s nothing stopping you from opening multiple accounts.”
The number of credit cards approved to applicants also dropped following the credit crunch, as providers needed to tighten lending criteria in order to break the trend that initially triggered the financial crisis.
According to the British Bankers’ Association, credit outstanding in April fell by £412 million, standing at £64.3 billion, £457 million lower the same month in 2008. The proportion of balances accumulating interest dropped by 0.9 percent, to 72.9 percent.
The amount of recorded transactions hit 157 million in April, 4.one percent than the month before and three percent lower than in 2008, with a value of £11.3 billion, 6.9 percent lower than in March and 10.6 percent less than the previous year.
Virgin recently increased its 0% balance transfer period on its Virgin Credit Card from 15 months to 16 months, making it the longest duration available in the market. This offer is open to all new and existing customers (provided you don’t already own a credit card with Virgin or one of its sister cards from the MBNA stable). However, it lowered its 0% purchases period from 6 months to 3.
The balance transfer feature allows new customers to move debt to the card and pay no further interest for up to 16 months, with a one-off transfer fee of 2.98%.
Filed under: Financial Advice