Credit card firms count cost of zero per cent deals

01 November 2004
Credit card companies are rethinking their marketing strategies after it emerged that zero per cent interest deals are costing £1 billion a year.

The massive competition for customers has meant that many wily borrowers are moving their debt after the introductory offers expire.

This means that they don't pay any interest, depriving credit card companies of their major income stream.

Warning of the threat of so-called rate tarts, PriceWaterhouseCoopers partner Richard Thompson said: "We anticipate that in future issuers are likely to become increasingly selective about which customers they offer balance transfers to and they will focus more heavily on customer retention."

He added, however, that the future for credit card companies remained positive.

"We anticipate that over the next few years the credit card industry will achieve penetration of 73 per cent of the population, which will still be below current US levels of around 85 per cent," he said.

The PWC report could see many firms ditching their zero per cent deals or refusing to offer credit cards to serial applicants.
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