Deals offered by credit card companies are now considerably more restricted when compared to what they were last year (2018). This has come in a time where the UK’s financial watchdog the FCA (Financial Conduct Authority) prepares its clamp downs on the country’s increasingly concerning debt problem, with a focus on the regulation of credit cards

What this means is that those looking for a good deal on credit cards will be significantly more restricted in their options compared to those applying for credit cards last year. For example, last year the 12 best-buy cards to choose from that offered interest-free periods for over 30 months on debt transfers. However, this year the very same 12 best-buy cards have a restricted interest-free period of 29 months. 

The average period of interest-free borrowing on these cards has gone down from 28 months in 2018 to 23 months in this current 2019 year. Within the 12 best-buy transfer cards, the average charge that was applied for borrowing £3,000 in 2018 was £63.60. This charge has since increased for this current year (2019) by nearly 19%, with borrowers having to pay a fee of £75.43 for borrowing the same £3,000. 

A balance transfer card is a type of credit card that is offered to those who are struggling to keep up with their current credit card debt repayments. These types of credit cards that are used for a balance transfer will come with lower interest rates than the card that the borrower’s debt is currently on, and typically offers (as previously discussed) an interest-free period. This interest-free period can often be a great way for borrowers to get some breathing space when struggling with their loan.

This worsening of the previously mentioned credit card deals has occurred alongside the FCA’s implementation of new rules which aim to help put an end to the issues accrued around persistent debt. These new rules were implemented in September 2018, and mean that firms have to offer borrowers alternative, more reasonable, repayment plans if they have been in debt for a consecutive 36 months or over.

Rachel Springall from Moneyfacts has commented on these changes, stating that “A year ago borrowers could find deals as long as 36 months compared to just 29 months today. Borrowers will not only find shorter zero per cent balance transfer terms but will also face higher upfront costs as fees are rising.” 

“The Financial Conduct Authority’s persistent debt scrutiny led to a mass movement in offers among credit card providers, which will be disappointing for borrowers hoping for extra breathing space in repaying their debts.”

Springall further added to her comments surrounding this topic, stating that: “The longest 0% balance transfer deals on the market may well be cut down further this year as the market faces economic uncertainties, so borrowers might want to act soon to snap up the lengthiest interest-free offers.” And that whilst these deals can be a great way for struggling borrowers to get some breathing space on their repayments: 

“Any borrower who is looking to consolidate their debts by using a 0% credit card would be wise to set out an appropriate repayment plan and stick to it, but also be wary of upfront fees to transfer debts.” 

Following a strict introduction of regulation in the payday loans industry, which has seen the exit of over 200 lenders and 2 million less loans funded per year since 2015, the City regulator is currently investigation other industries with direct lenders including rent-to-own, car finance and guarantor lending.