0% interest credit cards in question as new rules come into force
A new duty for financial services firms could cause credit card providers to abandon 0% interest deals, it’s been claimed.
New rules which require banks, credit card companies and other financial firms to put their customers first could spell the end of 0% credit card deals, according to a consumer campaigner.
Under the Consumer Duty, which comes into force on 31 July, firms must not rely on profits gained from bad “customer outcomes”.
Some fee-free credit cards come with a 0% period for purchases and balance transfers; if you pay off the balance within the term, you’ll pay no interest or fees. But since there’s no fee charged, companies make their money on these cards when customers miss a payment – which strips them of the 0% deal – or can’t pay off the deal within the term and end up being charged interest. This would be classified as a “bad outcome”.
James Daley, of the campaign group Fairer Finance, told The Guardian news site that the new rules therefore pose an “existential challenge” for 0% credit cards with no fees.
What is the Consumer Duty?
The finance watchdog, the Financial Conduct Authority, brought in the Consumer Duty to raise standards among regulated financial services companies and ensure all firms put customers first.
What are 0% interest deals?
Some credit cards come with a 0% introductory interest rate, typically lasting several months. It applies to purchases or balance transfers, depending on your card of choice. Although some balance transfer cards come with a fee, several don’t.
The 0% balance transfer and 0% purchase deals allow you breathing space to pay off a balance by making payments over several months – but it’s important that you’re able to pay it all off before the end of the 0% period.
The deals can save hundreds of pounds in interest, if you have a high balance but can pay off a chunk each month. Once the offer period ends, standard rates will kick in.
You can read more about 0% credit cards in our full guide.