If you’re dissatisfied with your bank account, then in most cases your best bet is to compare bank accounts and switch banks. Some of the signs you should switch are poor customer service, low interest rates (though they’re all pretty low right now), and poor overdraft terms. Keep in mind, however, that around 90% of today’s current accounts are held by five big banks: HSBC, Barclays, Santander, Lloyds TSB, and RBS.

Many people fear facing mountains of paperwork, should they decide to ditch their bank for a different one, but the banks themselves do most of the tedious work. Under the guidelines of the Financial Services Authority, banks and building societies have to make an account transfer within 10 working days, with the new bank taking on most of the work.

Once a date for the account transfer is agreed upon by your new bank and old bank, there should be no charge for the switch. You can find out more about your rights with switching bank accounts by going to fsa.gov.uk. If you’re always in credit, choose the bank with the best interest rate, but if you sometimes go into overdraft, choose the bank that gives you the best overdraft terms.

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When you’re shopping around for the best credit cards, you will probably consider one that offers 0% balance transfers if you carry a balance. It could save you big on interest charges. But the problem is that just a few companies issue most of the cards in use in the UK, and if you apply for a card that is allied with one of the companies you already have a card with, you probably won’t get the 0% offer, even if your application for a credit card is approved.

Interest free credit cards are great for people trying to get their debt under control, but card companies use lures like 0% balance transfers to attract new customers, and rarely offer the same rates to existing customers, even if they have outstanding credit histories. There’s no legal reason why they can’t do it, but they don’t do it because they see it as a draw for new customers only.

So if you were to try to get a Mint card and transfer your balance from your NatWest card, you wouldn’t be able to, because both cards are issued by Royal Bank of Scotland. MBNA issues the most different UK credit cards, with nearly 200 brands, while HBOS issues around 50 different cards.

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The best credit cards for balance transfers can save you a lot of interest, but only if you are disciplined about paying off the entire balance before the 0% rate expires. Remember that the clock for the interest free balance transfer rate starts ticking as soon as you open the credit card account, not on the date you make the balance transfer, so you want to make the balance transfer at the same time as you open the card if possible to maximise the time you have to pay it off.

Plus, some card issuers have what you might call a ‘balance transfer window’, where you can only get the 0% deal if you transfer a balance to your new card within x number of days from the date you opened your account, so be sure to check this ‘window’ when you are going through your credit card comparison

If you already have an account with RBS or Natwest, you can apply for a card with a 0% balance transfer for 15 months. Transfers are limited to 95% of your available credit limit. That means if you have a £2,000 card limit, you can transfer balances up to £1,900. You also get 0% on purchases for three months. You must be 18 or over and earn at least £10,000 per year to qualify.

The Tesco Clubcard Credit Card offers a 0% purchase period of 13 months and 0% on balance transfers for 9 months. You also get one Tesco Clubcard point for every £4 you spend on the card.

Finally, the Virgin Credit Card offers 12 months for 0% purchases and balance transfers, which makes it easy for you to keep up with where you stand as far as how long you have to take care of those balances before the higher interest rates kick in.

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Over the weekend, the RBS and NatWest brands dropped their 0% balance transfer (BT) periods from 16 months to 15 months. RBS/NatWest is the first major issuer to lower rates on its 0% BT cards since competition between issuers pushed up 0% Balance Transfer lengths to 16 months. Is this likely to start a trend downwards among other issuers, or will others still want to maintain market-leading products to acquire new customers?

As RBS/NatWest was one of the first major issuers to move to sixteen month 0% Balance Transfer cards, they have probably acquired a significant quantity of new customers. At the height of the financial crisis, they restricted their offers to existing customers only, so they have tended to be fairly cautious on the acquisition side. On the other hand, the change could signal that they are concerned that the UK economic recovery is starting to plateau.

They may also be preparing themselves for a slightly bumpier ride as we move into the end of the year and the beginning of next year. The government’s Comprehensive Spending Review, due to be announced on 20th October, is likely to detail significant public sector job cuts. The unemployment rate is tracked carefully by credit card Issuers as there appears to be a direct correlation between the rate of unemployment and the rate of credit card payment defaults. Early next year, the VAT rise to 20% on 4th January will impact consumers’ purchasing power. The implementation of the new Consumer Credit Directive on 1st February 2011 is also likely to impact credit card issuers, although exactly how is still a matter for debate (and will be the subject of later blogs).

Time will tell. It will be interesting to see how the other issuers respond to the RBS and NatWest change and whether it will result in a lowering of market-leading BT periods. Alternatively, other issuers, who have to date this year been relatively quiet, may take advantage and fill the gap. It will also be curious to see whether any changes have any follow-on impact to the 0% Balance Transfer and Purchases, the so-called ‘dual hook’ products (discussed in a previous balance transfer and purchases blog).

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This week the major UK banks have been publishing their half-year results.  Royal Bank of Scotland (RBS), last but not least, published its results this morning. While the headlines have been focusing on the bank’s return to profitability, the most interesting credit card information was tucked away in Barclays’ results.

The Barclaycard division revealed a 15% drop in profits in its US credit card operation due to tighter US regulation.  The UK is facing similar tighter regulation in the UK, which comes into effect in January 2011. The details and execution will be the subject of later posts on this blog, and are covered in other articles on CompareandSave.com.

In summary, the new regulations aim to provide consumers with greater protection and transparency over charges. The aims are good. If, as Barclaycard’s US results indicate, the sector becomes less attractive to issuers as a result, will it impact on the range of credit card products and innovation we are likely to see in the future?

Early indications from the US would suggest yes, at least initially. APRs have risen, 0% ‘teaser’ periods on balance transfers and purchases have reduced in length, and issuers have rationalised the number of cards in their portfolios. During the first half of next year in the UK we may see fewer, less interesting credit card products emerging. On the other hand, we will have more information about how the various fees attached to our plastic friends actually work. A trade off that may invoke mixed reactions depending on how you currently use your credit card.

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This may be tenuous, but I suspect there is life in the old cash back cards yet. Credit card reward schemes have always provided consumers with some interesting propositions. Incentives to ensure consumers use their credit card have come in all shapes and sizes – airmiles and cash back led the way.

As the big supermarkets have entered the finance market, and rewards schemes like the Nectar card have become established, credit card issuers have followed with a range of points-based retail schemes. Early this year Barclaycard launched its Freedom rewards scheme and Egg beefed up its points programme. American Express, the flagship issuer of reward programmes, has also had some wonderful airmiles promotions running recently.

From a comparison perspective, it quickly becomes hard to compare the different rewards schemes in a meaningful way, as they work in such a variety of ways. Depending on how you decide to use a particular rewards card, it can be of greater or lesser benefit.

In these uncertain, confusing times, a simple, easy to understand reward, which can be used universally, may have appeal. The traditional cash back card would seem to fit the bill.  Issuers such as Capital One and RBS/NatWest with their World cards have been testing the water recently. Could they begin to compete with the Amex Platinum cash back card? Could cash back cards start to take on the points-based rewards cards and become king of the rewards once more?

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Are the new best credit cards in the UK the ones that don’t have to be swiped? Barclays, Royal Bank of Scotland, Lloyds, and Citibank think they might be, and they’re hoping more consumers will realise the benefits of these credit cards that work with only a quick wave in front of a scanner.

Powered by a radio frequency ID (RFID) chip, Visa’s PayWave credit cards are growing in popularity, with more than 8 million issued by mid-2010. Visa expects the number to top 12 million by the end of the year. While the majority of the distribution of contactless credit cards has been through replacement of existing credit cards, increasing merchant acceptance of the technology and increasing user interest may push the sector toward a “tipping point” by the end of 2010, leading to millions of contact-free transactions.

Merchant acceptance and consumer usage of contactless credit cards is mostly confined to the London area, and represents less than 3% of the total million-plus point of sale terminals installed. But since this type of card is best suited to places where purchase speed is critical, the technology doesn’t have to dominate to be successful. Though a Datamonitor survey from June 2010 showed that only 3.5% of consumers have and use a contactless card, 37.5% of consumers state that they do not have one but are interested in acquiring one.

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Update 16/07/2010:

The 0% balance transfer market is certainly hotting up fast! Today, NatWest and RBS are launching their Platinum cards with 16 month 0% balance transfer offers. These are the first 16 month deals which have been available this year.

It will be interesting to see whether the other issuers who traditionally offer cards with strong 0% BT lengths follow suit. I suspect that the battle for the balance transfers has a way to run during this hopefully long, hot summer.

Original Post

About this blog

I’m Alex Acton, the CompareandSave.com author of the ‘On The Cards’ blogs about my take on the credit card market, what is happening, and how it may affect you if you wish to use a credit card.

While England and UK sports performances this summer have been mixed, there is unexpectedly good news for anyone wishing to transfer a balance on to a new credit card. The last couple of months have seen a strong set of 0% balance transfer cards returning to the market.

If you were looking to transfer a balance to a new credit card this January, you would have had a wintry shock. Only Barclaycard offered a 15 month interest-free balance transfer period open to new customers, and by mid-March, they had reverted to a 14 month card. If you consider that last year Virgin ran their market leading 16 month 0% balance transfer card, and a number of other providers were running 15 month cards, the reduction in choice this winter was a bit bleak.

Credit card issuers were planning a reduction in zero interest balance transfer lengths this year in preparation for new legislation due to come into effect later in the year (the regulatory changes are a topic for a later blog).

However, since May, competitive pressures among issuers have led to an unexpected increase in both the 0% BT lengths available and also the number of issuers who offer them. At the time of writing, there are six cards from mainstream credit card providers who offer 0% balance transfers for 15 months.

Whether any of the issuers break ranks and move to a market leading 16 month card in the coming months is a question. A preferable alternative for some issuers may be to relax their score card criteria and accept a slightly wider range of customers. Whether we begin to see a reduction in the 0% BT lengths in the autumn will also be interesting. ‘On The Cards’ will keep you posted.

For customers wishing to transfer a balance to a new credit card this summer, the choice is certainly more attractive than it was at the beginning of the year.

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