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Sancho Panza

42P In Every Pound Of Credit Card Debt Is Now On 0Pc Deals

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Telegraph 6/9/14

'Credit card borrowing is rising by 5.3pc a year, but borrowers are becoming more astute about the choice of their plastic, industry figures reveal.

According to the British Bankers' Association (BBA), 42pc of all borrowing on credit cards is now interest-free, up from 34pc two years ago.

The availability of 0pc credit cards, which was reduced after the credit crunch struck in 2008, has bounced back in recent years, particularly in the past 12 months.

The length of 0pc balance transfers has increased to nearly three years and banks are offering longer spells of 0pc credit when spending.

The longest 0pc period on spending is 20 months, offered by Halifax. Tesco Bank and American Express also offer competitive deals, with 0pc for 19 months and 0pc for 18 months, respectively.

On balance transfers, Barclaycard has increased the length of time borrowers can pay 0pc interest on a credit card to nearly three years. Its balance transfer card length has been steadily increased, up to 32 months now.There is a one-off 2.99pc balance transfer fee.

The BBA's figures did not report whether the increase in borrowers using the 0pc interest-free cards was down to existing borrowers switching from higher interest deals, or whether they were new borrowers.

Richard Woolhouse, chief economist at the BBA, said: “This is another set of good numbers that shows the UK consumer is putting the tough years behind them and feeling more confident about spending again.

“It’s also very striking how savvy customers have become in recent years. As much as 42pc of all borrowing on cards now is interest free – up from 34pc two years ago.

“This illustrates how many of us are cleverly using plastic to give us greater control about how we manage our finances without being charged to do so.”

creditcardborrowin_3028878a.PNG

creditcardpurchase_3028942a.PNG

Source: BBA'

“This illustrates how many of us are cleverly using plastic to give us greater control about how we manage our finances without being charged to do so.”

Said without a hint of irony.

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Where's the problem? I always owe my creditcard issuer a few hundred. Sometimes more if I've been spending on anything exceptional. I also have a direct debit to ensure it gets paid off every month and never incurs interest charges.

What seems mildly shocking is that anyone should pay creditcard interest, other than in exceptional circumstances. Such as the one time in my life when I did: starting a new job and buying an annual season ticket to commute, and paying that off over a couple of months.

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Where's the problem? I always owe my creditcard issuer a few hundred. Sometimes more if I've been spending on anything exceptional. I also have a direct debit to ensure it gets paid off every month and never incurs interest charges.

What seems mildly shocking is that anyone should pay creditcard interest, other than in exceptional circumstances. Such as the one time in my life when I did: starting a new job and buying an annual season ticket to commute, and paying that off over a couple of months.

I've paid my cards by direct debit for years, no chance of getting caught for interest and if you time it right you can get at least a month interest free credit for thousands of pounds worth of purchases.

There are those, however, who run all their cards up to the hilt and pay the minimum monthly amount. Good business for the card companies, draw them in with 0% interest for a year or two and then up it to 17% or 18% APR....... "That's the way to do it".

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.....but, but I thought it was the retailers that paid the costs when people pay with credit card.......it is not the interest you pay that counts any more it is the amount of money you spend with credit.....spend today pay tomorrow when tomorrow never comes 0% or not. ;)

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I'm guessing weasil words. 'Canny borrowers' are now frequently charged a 'balance transfer fee' as a % of the balance now...even though the 'rate' of interest is only 0%.

And if people spend, the order of transactions applied to the account means the cheapest debt is repaid first.

Yep...here you go:

http://www.uswitch.com/credit-cards/ppc/credit-card-balance-transfers?ref=ppcgoogle~gen~PFG412002&gclid=Cj0KEQjwhLCgBRCf0fPH043IlJwBEiQAf8P8U88CCx4exqgTn2RpCQO93ANKMv-UzuMtEsJcivygey4aAlMY8P8HAQ

I thought this bit wasn't true, and that all credit card companies must allocate payments to the highest interest bearing balance first?

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There are those, however, who run all their cards up to the hilt and pay the minimum monthly amount. Good business for the card companies, draw them in with 0% interest for a year or two and then up it to 17% or 18% APR....... "That's the way to do it".

I was amused by my credit card bill last month. 'If you make only the minimum payment, you will pay off your credit balance in forty years'.

Needless to say, I paid it all off rather than pay 19% interest for the next forty years.

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Sounds like a catastrophe waiting to happen.

I think it will make volatile periods of time, that we are baking into the cake. There will be periods of mistrust as people get to a point and default - then the central bank comes in and changes the price of debt money again, and so on.

We already went through one period in 2008. We've seen it before! Be prepared!

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I would guess most money on credits cards is paid off before IRs kick in.

I've only paid credit card IR once - when I drew some money out from a cash machine by mistake.

After all, its nuts to not use a CC to buy a big ticket item or anything off hte interweb - insurance annd all that.

The stat that would be interesting to know much CC debt is rolled over every month.

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good on eveyone taking advanatge of the banks to get 0% loan for while.

but what is of concern is why would banks let you get away with . I know if i was banker if you had done this once you would be on the 'non profitable list ' and i would not let you have credit card with my bank again.

maybe its just a loss leader hoping that you will slip up and they can hammer with high rates if you do.

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I use 0% credit cards never been stung for interest on them.

On my bookface feed I see countless incidents of apparently intelligent people using the same deals only to miss the direct debit payment by a few days and automatically revert to the 18-19% claw back. On a first offence they can usually be put back on the introductory rate but a months fees often have to be honoured. A mate of mine was smarting over £300 in extra charges and threatening to write them a strongly worded letter :D

it's never their fault

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IIRC, credit card providers are legally obliged to offer a facility for paying off the entire borrowed sum by monthly direct debit so as to avoid incurring interest charges. You have to ask, though, since they naturally tend to keep quiet about this!

Like all good HPCers, I also take full advantage of this facility. It really is a no-brainer.

Edited by snowflux

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http://bank.marksandspencer.com/pdf/cctc.pdf

Sections 8+9 worth a read.

They can raise rates if money market rates rise and they can end the agreement if they feel there is an increased risk you won't be able to pay.

Flipping a little short term debt is one thing but resting a finacial strategy on the continued availability of 0% balance transfers will only end one way.

Edited by Sancho Panza

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Just another symptom of extend and pretend imo. Any meaningful rate applied to accounts which have an ongoing balance may involve having to accept that they'll be unlikely to be repaid. I'm sure there are similarities with forbearance in mortgages.

Average debt is somewhere around £4,500 for those that have an ongoing balance.

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http://bank.marksandspencer.com/pdf/cctc.pdf

Sections 8+9 worth a read.

They can raise rates if money market rates rise and they can end the agreement if they feel there is an increased risk you won't be able to pay.

Flipping a little short term debt is one thing but resting a finacial strategy on the continued availability of 0% balance transfers will only end one way.

Have any of the banks actually imposed these conditions? if they did the debtor would probably be given the option of freezing the balance in a sort of debt management plan and the account would be suspended for future purposes.

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@ Sancho

I don't get this either. I don't spend enough to warrant putting any debt onto a balance transfer offer. The expensive things I buy (travel/holiday) typically have a 2% credit card surcharge so its cheaper to pay by other means. And if I were to transfer a credit card balance I'd have to pay a fee 2%+. So how is any of this "interest-free"? And why would I do any of those things?

Unlike using the normal 30-56 day interest free period on purchases to simplify cashflow on a monthly basis.

Its not even as if you can put money on deposit and beat the fees/rates involved.

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.....but, but I thought it was the retailers that paid the costs when people pay with credit card.......it is not the interest you pay that counts any more it is the amount of money you spend with credit.....spend today pay tomorrow when tomorrow never comes 0% or not. ;)

People who don't use credit cards to pay should be given a discount. :)

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