Credit card switching costs billions

23 September 2005
Credit card firms are losing up to £3 billion a year by offering zero per cent interest rates, encouraging 'rate tarts' to constantly switch their balance between cards.

Credit card firms will have to offer better deals to stop them 'haemorrhaging' money, according to financial comparison website, Moneynet.

Moneynet chief executive, Richard Brown, said: "One thing is for sure, mainstream card firms will have to be less complacent in order to retain existing customers - and win new ones.

"Competition in the credit card market is potentially excellent news for consumers, and with the likes of Egg shaking up the market with innovative new products, the longer term outlook for the canny borrower is good.

"But for the credit card company executives, the future might not be so rosy."

Datamonitor, a market research firm, found last month that introductory offers have helped to push down the average interest rate for UK credit card purchases from 18.6 per cent in June 1999 to 16 per cent in March 2005.

More companies were reported to be looking at ways to stem the 'rate tart' phenomenon, with some beginning to charge for debt transfers.

According to the British Bankers Association, credit card spending fell in August to £146 million as cardholders paid off more debts.

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