Hunting down the illusive low rate credit card

By John Braveman

2008 turned out to be the year when the financial chickens came home to roost, and its looking increasingly like 2009 will be a continuation of an economic freeze. Financial institutions are nervous, and even the lowest base rate of interest in the Bank of Englands 315-year history has done little to calm a jittery financial market. The common consensus is that the heady days of easy credit are over. However, consumers are still hungry for good credit card deals and have become accustomed to 0% offers and low APR on credit cards. Credit card companies are worried about exposing themselves to bad debt, so are there still low rate cards available to the clever consumer?

The number of television adverts offering 0% deals on credit cards has been considerably less than last year. Compared to 2008, when the thought of a recession was far from the average consumers mind, there has been very little in the way of credit card offers of any kind. This absence has been noted by the organisation Credit Action, who have found that credit in general and low rate credit cards in particular are much rarer than at the same time last year. They also found that where credit was available it was more expensive than before, with 0% offers being harder to find. The findings suggest that banks and credit lenders are reducing their market exposure and are now waiting to see what 2009 brings before opening up the market again to card-hungry consumers.

However, the popularity of credit cards remains unabated and consumers are still on the lookout for a credit bargain. Director of Credit Action Chris Tapp has commented on this, explaining that credit cards are an integral part of modern consumer money management for the public and a very normalised part of the way consumers manage and borrow their money. It looks like it is going to be very difficult to persuade a public that has grown so used to using plastic on a daily basis to change to a different system any time soon. The advent of online shopping and auction sites such as Ebay has also prompted an increase in the use of credit cards, as transactions online are almost exclusively credit card based. The combination of a public in love with credit and a shift in how we shop confirms that credit cards still have a special place in the nations wallets.

There are still bargains to be had, despite all the gloom and doom. 0% balance transfer cards are still relatively plentiful and special offers on purchases are quite common as well. The 0% grace periods on purchases tend to be much shorter than those for balance transfers and once these special offers end the APR can climb rapidly. This can prompt an unseemly scramble as customers desert their cards in search of a 0% balance transfer to save money. However, frequent card-jumping can quickly damage your credit rating and reduce the chances of further credit. This year, cards are looking for customer loyalty and are changing their tact accordingly. In the coming months we may start to see a groundshift in policy amongst card providers, where cards incur interest charges earlier, but those charges are kept lower to keep customers from seeking solace in a quick-fix 0% temptation.

Rather than joining in the scramble for the 0% offers that are still out there, credit card customers would be better advised to accept that the market has changed and that credit card interest payments are inevitable. Consequently the best thing to do is to look for long-term, low APR rates and cards that dont have too many hidden extras in the form of insurance charges, late payment fees and other handling fees. The days of free and easy lending finished in 2008 and everyone has to adjust their expectations to accommodate a much more bearish market, with caution being the watchword. If businesses have to adjust their parameters then so do consumers.

The Internet has its part to play in the brave new credit card world, and online comparison sites are coming into their own. They give the smart consumer a chance to make an informed decision before they leap blindly into the offer that seems to promise the most financial bling but may have a hidden sting in its tail once the honeymoon period is over. Credit card companies are realizing that there is a groundshift in the marketplace and that, despite the dire financial warnings issued almost daily, the consumer is very much in charge this time around. There are still low rate credit cards to be had, but it all has to be part of a much more symbiotic relationship between customers and credit card companies.

About the Author:

Financial writer John Braveman writes posts for various financial and finance industry related websites. After many years experience working in the finance sector he is well versed in the 'dark arts' of credit card finance. You can read more about low interest rate credit cards here.