subject: Why there are more credit card offers than ever [print this page] With new figures showing that credit card lending is increasing, it seems card companies are resuming their pre-recession battle for consumers' attention.
Bank of England statistics for July report that credit card lending has increased by 0.2 billion on the month before. This is a modest increase, but yet another sign that card companies are once again seeking favour with recession-battered consumers.
It was just two years ago that card companies cut the credit card limits of around 1.8 million people and were rejecting an average of 18,000 card applications every day. The result of this mistrust in consumers' ability to pay off their debt was that the number of cards in circulation dropped by nearly a million.
As well as lending a little more, card companies are displaying their new-found confidence in a series of longer-term 0% introductory offers - many of which are better than they were before the recession hit.
There are some 0% purchase credit cards with 13-month long interest free introductory offers while others are a little behind with 10-month deals.
Many cards recently changed their 0% period on its card from 10 months up to 12 months. The downside of this is that they concurrently reduced the length of their 0% balance transfer deals from 12 months to 9 months.
Many of these card providers offer a reward scheme that provides in-store vouchers for cardholders and some also encourage purchases with a 1% rate of cash-back for consumers buying at retailers such as Pizza Express.
These different cards can be discerned with any decent credit card comparison service.
As an added attraction to such spending incentives, some card issuers are providing balance transfers with a 0% interest period of up to 16 months in an attempt to entice cardholders into switching their outstanding balance between cards.
The card companies' renewed vigor in attracting customers has not pleased some quarters. Critics worry that card holders will fall into the trap of failing to be able to repay debts accrued during the periods of the introductory offers.
Stewart Hoise, a member of the Commons Treasury select committee, has claimed that while these deals may well assist card holders in the short term, the punitive rates that appear at the end of the offer will be ultimately damaging.
Although card companies may ostensible be providing consumers with a good deal in the form of 0% introductory offers, they are simultaneously increasing the rate of interest that awaits consumers' debt at the end of the offer period.
It's worth noting that bad rating cards such as the capital one classic credit card don't tend to have these intro offers in any case.
These rates have increased by 0.7% since the end of 2008 to an average of 17.3%. This is despite the fact that the base rate has been kept at 0.5% by the Bank of England for nearly 17 months.
While this latest batch of 0% deals can undoubtedly be made to benefit cautious cardholders, they may not ultimately benefit those who are new to credit cards or who have a history of missed payments.
The new push by card companies to attract customers will be sure to contribute to the nearly 17,000 people who it is estimated will become insolvent by the end of 2010.
