15 June 2006
The decision by credit card issuer American Express to stop offering balance transfers to new customers has been described as "the beginning of the end" for rate tarts, by an industry expert.
Rate tarts are those customers that change from credit card to credit card, taking advantage of the initial interest free offer on balance transfers before moving to a new offer.
Nick White, head of personal finance at price comparison and switching website uSwitch.com, said the decision was "a major development which could signal the beginning of the end of the rate tart phenomenon that has dominated the credit card landscape for the last two years".
He said: "Two of the balance transfer offers that are being withdrawn for new customers - the Nectar Amex 5.9% life of balance and the Blue Amex 6.9% life of balance – typified the type of offer that consumers have become used to seeing from the major credit card issuers.
"However, while these deals were very competitive for consumers, they came at a cost to the credit card industry, which was losing an estimated £600 million a year overall in revenue from balance transfer offers," he added.
Mr White explained that the number of 0% deals available had been falling and credit providers have become stricter with lending criteria.
American Express has stated that it will now be focusing more on its reward schemes as the main avenue through which to attract new customers.
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