Interest-Free Credit Cards Disappearing

The UK credit card market now offers consumers just six credit cards that offer interest-free periods on initial purchases of more than ten months, according to research commissioned by Sainsbury’s bank.

The bank also advised consumers that they should be aware that the length of theses interest-free periods can vary greatly, with some cards interest-free periods expiring after just three months. These deals can place a great deal of financial pressure on cardholders if the resulting balance cannot be cleared before the short deal period expires. The three months deals can mean purchases start to accrue interest after three months, usually at a very high rate of interest.

Donald MacLeod, credit cards manager at Sainsbury’s Bank, said: “ There is a huge choice of cards offering interest-free periods on initial purchases, but the length of these varies a great deal.”

Today sees the UK credit card market awash with 66 credit cards that offer interest-free periods on initial purchases. The average length of these deals is around six months.

A breakdown of the interest-free periods on offer from credit card issuers sees six cards offering a paltry three months interest-free on initial purchases, twelve cards offering between four to five months, 28 offering six months and 14 cards offering seven to nine months interest-free on initial purchases.

However, consumers should be aware that other factors, not just the length of the interest-free period, should be considered before deciding to swap cards.

According to Sainsbury’s, two in five card offering interest-free balance transfers charge a fee for this service, which can be between two and three per cent of the amount transferred.

There are now virtually no credit cards that offer balance transfers without charging a fee and the period length of these deals is shrinking as credit cards try to claw back some of the profits lost through deals designed to entice new customers.

Credit card holders should consider whether or not they can clear any balance transferred to anew card before the deal period expires, in order to avoid paying interest on any outstanding balance. Those who know they won’t be able to clear their credit card debt in the immediate future should carefully consider cards that offer a low rate of interest for the lifetime of the balance as this could save them hundreds in interest over the long-term.

Alisdair Milton
28th June 2006