The number of credit cards offering an interest-free balance transfer term of at least 12 months has more than doubled in the past two years to 54. But only about half of the customers whose applications are accepted must be offered these deals. Under the previous system, providers were required to give two-thirds of successful applicants the advertised rate. Now they can advertise rates that are handed out to just 51 per cent of customers. The law was intended to harmonise consumer credit laws across the EU, creating one market for retail financial services where consumers could shop around for the best deals outside their own country.
Banks had warned in 2007 that if the rules were put into practice the number of borrowers struggling to obtain a loan would rise. The British Bankers’ Association predicted that as many as 1.7m consumers would be unable to access credit or would find that the amount they could borrow would be limited if the directive was introduced. The UK Cards Association said the impact of the directive had been “limited” and that the UK credit card market continued to be highly competitive. Interest rates on credit cards are at the highest level for 13 years. Despite a period of low base interest rates, providers have pushed up rates to more than 19 per cent on average, after changes to the way that credit card debts are repaid. Consumers now pay off the most expensive debt first, which has reduced the revenue available from cards for providers.
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