- Number of zero percent purchase deals slashed by 20%
- Balance transfer deal periods cut to an average of nine months
Research from the independent financial comparison website shows up to 31 credit cards offering zero per cent deals on spending have been withdrawn in the past year as card firms bid to cut back on bad debts.
And borrowers who want to transfer debts to zero per cent credit card deals are also under pressure with the average balance transfer period cut to nine months from 10 months and the number of offers on the market reduced by 10%.
The cutbacks come against an increase in rates across the market taking the average credit card rate to an all-time high of 18% after an increase of 0.5% in the past 12 months despite the Bank of England cutting the base rate by 4.5%.
Pierre Williams, Head of Research at MoneyExpert.com, said: ìCredit Card firms are battling against bad debts and desperately trying to boost profits or in many cases cut their losses. Zero per cent spending deals are an obvious target as are balance transfer offers.
ìWeíve even seen the likes of Egg move to start charging customers a flat fee for using a credit card and itís certain that they wonít be the last to do so.”
In July 2008 165 credit cards offered introductory new purchase rates of 0 per cent, but that number has since been cut to 134. Those coming to the end of their deals who havenít cleared their balance will also be facing a sharp hike in their monthly repayments. The average APR on cards offering zero per cent deals, after the deal expires, has jumped from 17% to just below 18 per cent in the last 12 months.
Pierre Williams continued: ìThereís a real danger of a vicious circle here for borrowers reliant on zero per cent deals. As the lengths of deal are cut theyíll have to make more applications and risk more rejections making their credit histories worse, and limiting the chances they have of getting credit in the future.”
Failure to secure a zero per cent balance transfer deal will have immediate implications for the typical borrower. With the average balance transfer now worth £1,846, and the average APR at 18 per cent, those missing out will have to pay interest across the year of just over £332, the equivalent of an additional £27.66 a month.