Credit Card Trends

Credit card companies have been in the news a lot recently with many changes to the way they work proposed. All these changes seem centred around ensuring they still make money despite changes in the way consumers use their cards. The main concern has seemed to be with so called ‘rate tarts’ who bounce their balance around different credit cards with zero percent balance transfer periods. However that’s not the only concern that credit card companies have and not the one behind the newest trend by some credit card companies to charge interest from the point of purchase rather than a traditional interest free period.

Traditionally consumers who pay their balance in full at the end of each month stand to gain by not paying any interest on their purchases. Usually an interest free period has applied to the credit card and generally it’s only once you start to carry your balance over that you stand to pay interest. This has worked out well for some consumers and more people have started to use their credit cards for convenience, paying for purchases with plastic then clearing the balance at the end of the month eliminating the need to carry cash to the supermarket or high street.

However a number of credit card companies have gone ahead with proposed changes and started to apply interest from the point of purchase. This means that even if you clear your balance at the end of the month, you will still be paying interest between the time of purchase and the date at which you clear your balance. Naturally this can seem like bad news for those consumers who clear their balance each month and can seem like they are being penalised for good financial practice.

So far it’s only some credit card companies that have opted for this new practice, Halifax Flat Rate Visa, Lloyds TSB Advance MasterCard and Bank of Scotland’s Little Black Visa among them. Although initially it seems this is a purely good for credit card companies, there is an argument it could be good for some consumers. Despite the trend many consumers have of clearing their balance each month there are still a large number of people who carry balances over and so far the credit cards that have withdrawn interest free periods also offer very good rates of APR which may make them a good credit card for certain customers.

Despite all the changes going on in the way credit cards work it is still possible to get a good deal. However the changes do mean it’s more important than ever to shop around for the best deal for you. Additionally it’s useful to bear in mind how you intend to use your credit card when choosing what type to go for and to check the small print carefully. Being aware of how you use your credit card will enable you to choose a company that offers the best APR for your circumstances.

23/5/05