Introductory purchase – the new credit card war - Credit cards - News - Moneyfacts

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Introductory purchase – the new credit card war

Introductory purchase – the new credit card war

Category: Credit cards

Updated: 08/07/2014
First Published: 08/07/2014

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Credit card providers have long been doing battle to get our custom. For years that battleground has been to do with balance transfers, and in that time we've witnessed obsessive one-upmanship over the length of a 0% deal.

But, that could be coming to an end. Research by Moneyfacts.co.uk highlights what could be the new trend by credit card providers to entice customers, and it looks like introductory purchase deals could be the new credit card war.

In 2000, when balance transfer credit cards were first marketed, the norm was to offer six months interest-free periods to attract customers. But, over the years this has steadily risen to its present record of 33 months held by Barclaycard, making it harder for other providers to compete.

"Credit card providers have been trying to win our custom with ever-increasing 0% balance transfers, but it can't go on forever as the longer the period the longer it is before the card providers make any money from our debt," said Sylvia Waycot, editor at Moneyfacts.co.uk.

"It appears that the latest hike by Barclaycard to 33 months has caused the industry to throw in the towel on that particular game and move to the relatively forgotten area of 0% purchase interest instead."

Up until now 0% introductory purchase periods haven't received the same kind of attention as balance transfers, but after six months of no movement at the top of the best buy table, Tesco Bank has broken ranks and lifted the 0% introductory purchase period from a high of 18 months to 19 months, in what could become the next battleground for our custom.

"This area of enticement has been underserviced by card providers as it is a pretty sure bet that most people with a credit card are going to spend on it, making it unnecessary and arguably unprofitable to give long 0% interest periods," added Ms Waycot.

"However, as the term for 0% balance transfers reaches extreme levels, card providers can't continue to compete indefinitely as the only winner is the consumer, and providers won't like those odds.

"Ultimately, this is great news if you are thinking of making a big purchase such as a holiday and were already considering a personal loan. If you were to borrow £2,000 over 18 months at the average loan rate of 19.9% it would cost you £302 in interest, whereas a 0% introductory purchase card would incur no interest at all over the same period."

So, could competition over introductory purchase deals prove to be the new credit card war? Borrowers might hope so, as it'll offer a whole other way to cut borrowing costs down to size. Keep an eye on our best buy tables to be the first to know when new deals are launched and see if you can benefit from the contest.

What Next?

Compare the best 0% Purchase Cards in our best buys charts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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