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June 01, 2011

  • News:  Are UK Card Intro Rates A Front? 

    Experts are pointing the finger at credit card companies in the UK for exploiting a European law that is designed to guard against borrowers getting credit by marketing deals that many consumers do not qualify for. Credit cards offering introductory zero percent interest to new customer are at a record high. Unfortunately, according to one financial research firm, the number of credit card applicants that are able to take advantage of these deals is falling after the introduction of a European Union consumer credit directive this year.

    Consumer groups claim credit card providers are simply using the zero percent deals as a way to get free advertising. Deals like this draw attention from websites and other industry research venues that look out for deals like this and they get mentioned in the "best new credit card offer" sections. Experts say it's cheap for the banks to borrow money right now so they can take on more accounts with these offers. Unfortunately, the law allows them to decline more applications too. Research shows the number of card deals that offer balance transfers at a zero percent interest rate for 12 months has more than doubled in the past two years to 54, yet only half of the customers whose applications are accepted must be offered these deals.

    Under previous regulations, providers were required to give two-thirds of successful applicants the advertised rate but now it requires only 51 percent. The law was intended to bring together credit laws across the EU, creating one market for retail financial services so consumers could shop around for the best deal. The UK Cards Association said the laws had a limited impact on the UK credit card market and that it is still highly competitive. But interest rates are at their highest level in 13 years and after the low introductory rate, providers have pushed rates to more than 19 percent, on average.

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