Hunting down the illusive low rate credit card
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 remains unabated and consumers are still on the lookout for a credit bargain. Director of Credit Action Chris Tapp has commented on this, explaining that credit cards are an integral part of modern consumer money management for the public and a very normalised part of the way consumers manage and borrow their money. It looks like it is going to be very difficult to persuade a public that has grown so used to using plastic on a daily basis to change to a different system any time soon. The advent of online shopping and auction sites such as Ebay has also prompted an increase in the use of credit cards, as transactions online are almost exclusively credit card based. The combination of a public in love with credit and a shift in how we shop confirms that credit cards still have a special place in the nations wallets.
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 had a huge influence in how credit card customers approach the market, with online comparison sites giving the savvy consumer the power of knowledge. Credit card consumers are much more aware of the small print that previously went unnoticed and are much more likely to spend longer comparing and contrasting cards before making an informed, final decision. This puts the consumer in a very powerful position, as it is up to the credit card companies to make attractive (but realistic) offers to tempt in new customers and keep existing ones in the fold. Despite the dire financial warnings issued almost daily by the media, the consumer is very much in charge this time and isnt going to be fooled by cards that promise the earth. A far more symbiotic relationship between credit card lender and the consumer will be the result of this market readjustment.
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 remains unabated and consumers are still on the lookout for a credit bargain. Director of Credit Action Chris Tapp has commented on this, explaining that credit cards are an integral part of modern consumer money management for the public and a very normalised part of the way consumers manage and borrow their money. It looks like it is going to be very difficult to persuade a public that has grown so used to using plastic on a daily basis to change to a different system any time soon. The advent of online shopping and auction sites such as Ebay has also prompted an increase in the use of credit cards, as transactions online are almost exclusively credit card based. The combination of a public in love with credit and a shift in how we shop confirms that credit cards still have a special place in the nations wallets.
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 had a huge influence in how credit card customers approach the market, with online comparison sites giving the savvy consumer the power of knowledge. Credit card consumers are much more aware of the small print that previously went unnoticed and are much more likely to spend longer comparing and contrasting cards before making an informed, final decision. This puts the consumer in a very powerful position, as it is up to the credit card companies to make attractive (but realistic) offers to tempt in new customers and keep existing ones in the fold. Despite the dire financial warnings issued almost daily by the media, the consumer is very much in charge this time and isnt going to be fooled by cards that promise the earth. A far more symbiotic relationship between credit card lender and the consumer will be the result of this market readjustment.
About the Author:
John Braveman has many years of experience working in the financial sector. He writes for various websites and uses his experience to help present a clear view of the financial market. You can read more about low interest rate credit cards here.
posted by Credit Counseling at
2:12 PM
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