0% Credit in decline as APR rises, is now the best time to borrow?

We have experienced record lows in the credit card borrowing market over the last few years as competition between lenders increased. However have we seen the last of the 0% credit card interest market? Is it now better to look to unsecured loans to borrow money as cheaply as possible?

Latest research from the Moneyfacts UK Credit Card Trends Treasury Report, confirms that there has been a definite slowdown in the credit card market as 0% rates are decreased, and the average APR is now at an all-time high. The figures confirm that the average 0% purchase credit card term has decreased by 5 days over the last 3 months and is now 375 days.  Furthermore, the number of deals available is now 96, a drop of 6, which is the lowest number of deals that have been available since December 2016.

Although the figures are not that high, what do they mean to us as consumers? Well it marks a clear change of direction in the sector which may result in uncertainty and a lack of choice. In the previous quarter April 2017-June 2017 there was a significant increase in the average purchase term which hit record highs of 380 days, so there is clear evidence of change.

There is further evidence in the credit card balance transfer sector too. The average 0% balance transfer deal has fallen by 17 days in the last 3 months to 643, with the number of cards offering this service also falling by 9 to 117. Both are the lowest numbers recorded since December 2016.

The withdrawal of some of the longest introductory deals ever has contributed to the reduction in 0% deals. Virgin Money, MBNA, Lloyds Bank and Sainsbury’s Bank have all withdrawn their most prominent deals during the last 3 months. The best balance transfer currently available is via Barclaycard over a 40 month period, which in July 2017 was a 43 month period. So its clear lenders are becoming increasingly cautious in this sector, but why?

Perhaps the recent focus on credit cards and unsecured loans by the Bank of England could be a factor. The Bank confirming, earlier this year that household debt is at its highest since before the financial crisis hit. Lenders it seems are responding and withdrawing some deals so as to appear more ‘responsible’. The increase in the average APR may also be a factor with it rising by 0.1% in the last three months to hit a record high of 22.9%. This has been driven by a combination of lenders increasing rates and the launch of several cards launched with higher than average APRs.

This means that borrowers need to be savvier and aim to repay their credit card balances within the 0% interest free period. If not, interest charges will be potentially out of control.

In summary therefore, it isn’t overly positive for credit card borrowers at the moment so make sure you check out the best 0% interest card deals, before they are withdrawn from the market. Always try and make sure that you can repay the total balance before the end of the 0% period is over. If this isn’t possible, then, with rates remaining at an all-time low, an unsecured loan may be a better option




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