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 bargains to be had, despite all the gloom and doom. 0% balance transfer cards are still relatively plentiful and special offers on purchases are quite common as well. The 0% grace periods on purchases tend to be much shorter than those for balance transfers and once these special offers end the APR can climb rapidly. This can prompt an unseemly scramble as customers desert their cards in search of a 0% balance transfer to save money. However, frequent card-jumping can quickly damage your credit rating and reduce the chances of further credit. This year, cards are looking for customer loyalty and are changing their tact accordingly. In the coming months we may start to see a groundshift in policy amongst card providers, where cards incur interest charges earlier, but those charges are kept lower to keep customers from seeking solace in a quick-fix 0% temptation.
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 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 bargains to be had, despite all the gloom and doom. 0% balance transfer cards are still relatively plentiful and special offers on purchases are quite common as well. The 0% grace periods on purchases tend to be much shorter than those for balance transfers and once these special offers end the APR can climb rapidly. This can prompt an unseemly scramble as customers desert their cards in search of a 0% balance transfer to save money. However, frequent card-jumping can quickly damage your credit rating and reduce the chances of further credit. This year, cards are looking for customer loyalty and are changing their tact accordingly. In the coming months we may start to see a groundshift in policy amongst card providers, where cards incur interest charges earlier, but those charges are kept lower to keep customers from seeking solace in a quick-fix 0% temptation.
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.
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