Credit Card Companies Feeling The Heat - says Moneynet
Credit card companies are losing around £2 - £3 billion a year through offering consumers 0 % deals on balance transfers and purchases.
While so called 'rate tarts' have enjoyed the benefits of switching debt between credit card providers - at the expense of the plastic firms - Moneynet.co.uk, the online financial data comparison site, today said that UK credit card firms would have to deliver ever more competitive products if they wanted to retain customers.
"Recent research from Apacs and the BBA* shows that spending on credit cards is expected to rise by just 3 per cent over 2005 - down from last year's rate of 8 per cent - and Apacs has forecast zero growth by the end of 2006.
"The standard credit card is effectively an endangered species," said Moneynet chief executive Richard Brown.
"Up until the end of last month, borrowing on credit cards has grown by just £0.8bn, compared with £3.8bn during the same period last year. But debit card use is currently going up at a rate of 20 per cent a year, and now accounts for two thirds of all spending on plastic," said Brown.
"And there are new threats to the overall health of the credit card - Egg's new Money Manager account, effectively a debit card with an overdraft facility where you earn interest on credit balances and pay interest when overdrawn - is likely to herald a new trend, with more flexible cards that will pay interest when in credit."
"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," he added.
* Apacs report, August 2005
BBA bulletin, September 2005
http://www.moneynet.co.uk
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Notes for editors:
Credit Card Borrowing Facts:
* 93% repaid in a year
* 73% repaid in a month
* 17% borrowed at 0% interest
Source: APACS Review of 2004
About moneynet
Moneynet.co.uk is the UK's most established personal finance research and data website. The company offers consumers a wide range of low cost financial products: from mortgages and personal loans; to car, home and medical insurance; credit cards; savings accounts and best-buy fixed rate products. Moneynet.co.uk is an ethical, impartial and comprehensive source of consumer finance information, covering the whole of the personal finance sector.
Contact details:
Phone: 0208 313 9030
E-mail: online@moneynet.co.uk
Web: http://www.moneynet.co.uk
Press enquiries:
Moneynet
Richard Brown, Chief Executive,
Phone: 020 8313 9030
David Andrews Media Ltd
David Andrews
Phone: 01273 774109
E-mail: david@davidandrewsmedia.co.uk
About the Author
Moneynet was founded in 1997 by Chief Executive Richard Brown to simplify the personal finance market and provide consumers with impartial and interactive information on financial products and services.
http://www.moneynet.co.uk
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