If you’ve been looking around for a good deal on a credit card but not been able to find what you need, you’re not alone. Experts have warned that the very best credit card deals on the market are being withdrawn due to the levels of debt in the UK.
This latest crunch follows hot on the heels of the report from the Financial Conduct Authority (FCA) last year which looked into the credit card industry. Following warnings from the FCA and amid calls for debts to be repaid quickly, many low-interest deals have evaporated.
The FCA Effect
There’s no doubt that the report from the FCA has been one of the major influencing factors in the movement of the credit card market. The concerns that consumers were relying too heavily on credit rather than their own finances has led to a flurry of activity – and it’s not good news if you’re looking for cheap borrowing.
The FCA strongly suggested that lenders make sure any debt is repaid as quickly as possible, reducing the dependence on cheap credit to pay for everyday essentials.
The net effect of this warning is that lenders have whipped away their best deals, leaving customers without the low-interest rates or no-interest credit cards that made borrowing much more affordable.
Despite there being many factors causing instability in the economy at the moment, experts have pointed to the FCA report as being the primary cause of the disappearance of credit card deals.
Although the FCA’s primary concern was reducing the debt of the nation, the impact of their report has the potential to cause borrowers to end up spending more.
There are still zero-interest and low-interest credit cards on the market, but they’re far less easier to find than before and the terms are much stricter. For example, the longest interest-free period has shriveled from 37 months to 32 months, according to Moneyfacts, one of the leading data providers.
Many deals have much shorter periods than 32 months, forcing customers to keep changing to a new account to prevent paying interest. Every time they switch, a fee will be payable, which can be up to 3% of the balance. With multiple switches, these fees can start to mount up meaning that borrowers will be paying substantial sums.
This means that overall, customers will actually be clearing their debts more slowly than before – the opposite of what the FCS recommended.
It is still possible to find cards which don’t charge a fee to transfer the balance, but these don’t offer the best terms for those seeking out zero interest.
Manage your Debts
There’s no guarantee how long the current deals will be available for, particularly with the Brexit effect weighing heavily on the market as well. If you can afford to pay more than the minimum to clear the debt more quickly experts are recommending you do so to avoid having to rely on offers and deals.