Risk appetite dries up, as 0% credit card offers drop to record low

The findings are included in Moneyfacts’s UK Credit Card Trends Treasury Report, which studies and publishes data on personal loans, credit cards and overdrafts each quarter.

Initial discoveries from the latest report, before the full version is published later this week, show the number of interest-free offers has fallen by 33 in just two years to 55 in the last quarter. They also show the average purchase APR has risen to a new high, largely as a result of credit cards with reasonable rates being pulled.

Moneyfacts said the pandemic has spurred providers to rethink credit card interest-free offers and, at the same time, has increased the cost to the consumer for everyday purchases.

Rachel Springall, finance expert at Moneyfacts, said: “As uncertainty builds surrounding consumer debt, this shake-up of the credit card market could not come at a worse time. Consumers will have less choice when picking a zero percent card for making purchases and the cost to borrow on a credit card outside of a zero percent offer has risen to a record high.

“Borrowers may well use credit cards as a way to spread the cost of their purchases, but for those struggling with debt or have had their personal circumstances change in light of the coronavirus pandemic, these debts could hang overhead for much longer then they expect.”

Springall explained that credit card providers act quickly when the risk to take on debts escalates and right now, there is a refocus of credit card propositions to mitigate debt write-offs. This echoes movements seen after the financial crash – when between June 2008 and June 2009, the number of zero percent purchase cards fell from 112 to 85.

Springall added: “In the months to come we may see the credit card market contract further, so if borrowers are in a position to do so, now may well be the time to act to get the best deal they can.”

Source: Moneyfacts