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Interest-free credit card warning as Christmas borrowers face shock 35% charge | Personal Finance | Finance
The festive season typically sees a surge in demand for interest-free credit cards to cover the seasonal splurge. However, new research suggests they are worse value than before and experts warn consumers should beware treating them as an easy option.
A typical UK household spends just over £2,500 in a normal month but that jumps to £3,240 in December, as we spend an extra £740 over the festive period, Bank of England figures show.
The cost-of-living crisis is taking its toll as one in three will turn to credit and finance to cover the expense as the cost-of-living crisis drags on, according to a separate study by John Lewis.
Taking out a credit card that charges zero interest on new purchases for a lengthy introductory period is tempting and can work out nicely for those who handle them carefully. However, they are also risky as borrowers will find themselves paying punitive double-digit APRs on any unpaid balance the moment it ends.
James Daley, managing director of consumer group and ratings provider Fairer Finance, warned that zero-interest purchase credit cards are less competitive than just one year ago, too. “Interest free periods have been falling while APRs are rising, too.”
Before the pandemic cost-of-living crisis, it was possible to find interest-free introductory rates stretching to 30 or even 36 months. Last Christmas, seven credit cards still charged zero interest on purchases for at least 20 months, with NatWest, RBS, Ulster Bank and Barclaycard stretching to 24 months, Daley said. “Today, just one card offers more than 20 months.”
The Barclaycard Platinum All-Rounder Visa’s introductory rates now offers the UK’s longest running initial purchases deal at 21 months.
At that end of that, the APR increases to 24.9 percent.
Others charge zero interest for 18 months, notably M&S Bank Credit Card Shopping Plus, HSBC Purchase Plus Credit Card Visa and the MBNA 0% Transfer and Purchase Credit Card Mastercard, Moneyfacts figures show.
Of these, HSBC and MBNA have follow-on charges of 24.9 percent, while M&S charges 23.9 percent. While these rates are standard, they’ll come as a huge shock for those who have to pay them.
The average interest-free credit card deal now lasts for a much shorter term of just six months, Daley said, and many have a sting in the tail as standard APRs have been creeping up.
“The average in December 2022 was 22.9 percent but borrowers pay 24.4 percent today, while some rates can be as high as 34.9 percent.”
That will come as a shock for people who do not clear their bill by the time the introductory rate ends. Suddenly paying huge rates of interest will worsen any money problems they had before.
When taking out a new zero-interest rate, it’s worth checking what you’ll pay when it expires.
Daley said credit card companies may soon face fresh scrutiny by City watchdog the Financial Conduct Authority, as they are now obliged to prove they are offering fair value to customers under its new Consumer Duty rules.
Borrowers who play the game and regularly move their balances from offer to offer can get excellent value for money. “Yet credit cards are a very expensive way to borrow if you’re not benefiting from a promotional rate.”
Daley added: “The grim truth is that more vulnerable customers often contribute the greatest amount to card company profits.”
READ MORE: Top cashback cards for Christmas spending this week to ‘take advantage’ of sales
For those struggling to pay their credit card bill, Andrew Hagger, consumer finance expert at MoneyComms.co.uk, suggested transferring the debt to a card charging zero interest on balance transfers.
Balance transfer introductory rates last longer, with the Barclaycard Platinum 29 Month Balance Transfer Visa stretching to 29 months, while the M&S Credit Card Transfer Plus offer runs to 28 months.
Switchers typically have to pay a balance transfer fee of between 2 percent and 3.5 percent, which would cost up to £105 on a £3,000 debt, but this may be worth paying.
Theoretically, borrowers could keep switching their balance from one card to another but Hagger warned: “Do not use them to avoid facing up to any credit problems. At some point, you have to clear that debt.”
Nobody wants to approach next Christmas still paying off this one, so approach all forms of credit with caution.
Mumbai:
The Indian equity benchmark indices opened higher on Friday amid positive global cues, as buying was seen in the IT, pharma and auto sectors in the early trade.
At around 9.27 am, Sensex was trading 265.3 points or 0.33 per cent up at 80,066.81 while the Nifty added 89.85 points or 0.37 per cent at 24,336.55.
Nifty Bank was down 222.85 points or 0.40 per cent at 54,978.55. The Nifty Midcap 100 index was trading at 54,980.80 after increasing 10.95 points or 0.02 per cent. Nifty Smallcap 100 index was at 16,903.30 after declining 60.20 points or 0.35 per cent.
According to market watchers, “after a positive opening, Nifty can find support at 24,200 followed by 24,100 and 24,000. On the higher side, 24,500 can be an immediate resistance, followed by 24,600 and 24,700.
“The charts of Bank Nifty indicate that it may get support at 55,000 followed by 54,700 and 54,500. If the index advances further, 55,500 would be the initial key resistance, followed by 55,800 and 56,200,” said Hardik Matalia, Derivative Analyst of Choice Broking.
Meanwhile, in the Sensex pack, TCS, Tata Steel, Maruti Suzuki, Eternal, ICICI Bank, SBI, HDFC Bank, Infosys, M&M and Tata Motors were the top gainers. Whereas, Axis Bank, Tech Mahindra, Nestle India and IndusInd Bank were the top losers.
In the last trading session, Dow Jones in the US added 1.23 per cent to close at 40,093.40. The S&P 500 climbed 2.03 per cent to 5,484.77 and the Nasdaq added 2.74 per cent to close at 17,166.04.
In the Asian markets, Jakarta, Bangkok, Seoul, Hong Kong, China and Japan were trading in green.
According to analysts, US markets extended their rally on Thursday as investors snapped up hard-hit technology stocks, helping boost the S&P 500 out of correction territory.
The foreign institutional investors (FIIs) bought equities worth Rs 8,250.53 crore on April 24. However, domestic institutional investors (DIIs) sold equities of Rs 534.54 crore on the same day.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
Mumbai:
Indian equity markets are trading in the red as tensions soar between India and Pakistan over the Pahalgam terror attack in Kashmir. Sensex, the 30-share BSE benchmark, has crashed over 1,000 points and is now trading below the 79,000-mark. Nifty, the NSE index of 50 shares, fell below 24,000 points.
The markets went up in early trade, driven by a global rally and fund inflows, but the momentum got lost thereafter, and it gave up the initial gains.
The markets are also upset by unimpressive March quarter earnings by Axis Bank, the third-largest private sector bank of the country. The bank’s shares have fallen 4.65% after reporting a decline in quarterly profit from Rs 7,130 crore in the year-ago period to Rs 7,117 crore.
Besides Axis Bank, major laggards include Bajaj Finance, Bajaj Finserv, Tata Motors, and Tech Mahindra. On the gaining side are TCS, Infosys, Reliance, HCL Tech, HDFC Bank, and ICICI Bank.
At least 26 civilians were massacred by terrorists in a tourist hotspot known as ‘Mini Switzerland’, leading to both countries pulling out their diplomatic staff and suspending visas issued to the other nation’s citizens. (Follow live updates here)
The latest flare-up at the Line of Control was speculative firing by Pakistani troops, which is being seen as an attempt to provoke the Indian side. Indian troops retaliated effectively against the firing from multiple Pakistani posts.
As Indian equities braced for the impact, global equities, including the Asian markets, were charting in the positive territory. South Korea’s Kospi index, Tokyo’s Nikkei 225, Hong Kong’s Hang Seng, and Shanghai SSE Composite were all in green.
Similar trends were seen in US equities, too. Last evening, Nasdaq Composite closed 2.74 per cent higher. S&P 500 jumped over 2 per cent and Dow Jones Industrial Average surged 1.23 per cent.
Mumbai:
Equity benchmark indices Sensex and Nifty declined in early trade on Thursday amid profit-taking after a seven-day rally and muted trend in Asian markets.
The 30-share BSE benchmark declined 242.01 points to 79,874.48 in early trade. The NSE Nifty went down by 72.3 points to 24,256.65.
In the past seven trading days, the BSE benchmark gauge zoomed 6,269.34 points or 8.48 per cent and the Nifty jumped 1,929.8 points or 8.61 per cent.
From the Sensex firms, Eternal, Bharti Airtel, ICICI Bank, Mahindra & Mahindra, HCL Technologies, Reliance Industries, and HDFC Bank were among the laggards.
IndusInd Bank, Tech Mahindra, Nestle, Bajaj Finance, Axis Bank, and Tata Motors were among the gainers.
In Asian markets, South Korea’s Kospi index, Shanghai SSE Composite, and Hong Kong’s Hang Seng were trading lower while Tokyo’s Nikkei 225 quoted in the positive territory.
US markets ended sharply higher on Wednesday. Nasdaq Composite jumped 2.50 per cent, S&P 500 surged 1.67 per cent and Dow Jones Industrial Average climbed 1.07 per cent.
Global oil benchmark Brent crude climbed 0.12 per cent to USD 66.20 a barrel.
Foreign Institutional Investors (FIIs) bought equities worth Rs 3,332.93 crore on Wednesday, according to exchange data.
The BSE benchmark jumped 520.90 points or 0.65 per cent to settle at 80,116.49, the highest closing level since December 18, on Wednesday. The Nifty rallied 161.70 points or 0.67 per cent to 24,328.95.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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