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Our research uncovers why interest free offers aren’t always free

49% of people with an interest free period on their credit card, end up missing the 0% offer expiry date and pay an average of £267 each

Our research reveals 49% of holders of credit cards with 0% interest introductory periods miss the end of their 0% period, unwittingly walking into paying high interest rates.

On average, those who did not pay off their balance at the end of their 0% period ended up paying £267 in interest charges.

We are calling on credit card providers to remind customers more prominently when their introductory period is about to end and clearly lay out what the new interest rate will be.

0% interest offers – watch out for the expiry date

Credit card providers entice customers with introductory 0% offers, where you can avoid paying interest on your card balance for as long as 40 months.

When the introductory offer is over, the interest rate jumps to the provider’s standard APR which can be up to 34.9%.

When does the 0% offer start?

Even when consumers have kept note of how long the interest-free period lasts, they are unsure of when it actually starts, so the offer could well run out sooner than expected.

For most providers, the interest-free period begins as soon as a borrower is accepted for a card, but a fifth of people believe it’s when they transfer their first balance and 16% think it only begins when the card arrives in the post.

No warning for 1 in 3

A third of those who have taken out a 0% credit card claimed to have received no prior warning from their provider when their interest-free period would come to an end.

This contradicts the rules set out in the industry’s Lending Code, where lenders must provide four to eight weeks notice of when the introductory offer ends “on the front of the statement or in a separate, prominent personal notification to the customer”.

Had they seen a prominent warning, 85% said that they would have switched to a new 0% deal.

More clarity around 0% interest offers

Tashema Jackson, money expert at uSwitch, says:

“We are calling on providers to give customers clearer and more prominent notice before jacking up the interest rate, to help people better manage their debt.

“In the meantime, the onus is on credit card holders to plan ahead. Put a note in your calendar when you take out a card for a couple of months before the perk is due to end. This will give you time to research other deals on the market and transfer your balance.”

Still interest free borrowing for the cautious

If you read all the small print thoroughly, plan your spending and set up Direct Debits to pay off your balance entirely before the 0% interest period ends, you can still effectively borrow without paying interest.

  • RussellR

    “Even when consumers have kept note of how long the interest-free period
    lasts, they are unclear when it actually starts, so the offer could well
    run out sooner than expected.”

    If the consumer is unclear, then they should read the Terms and Conditions – and if they are still unsure, then ask the company rather than take the risk of missing the end of the interest free period.

    “A third of those who have taken out a 0% credit card claimed to
    have received no prior warning from their provider when their
    interest-free period would come to an end.”

    The keyword here is “claimed” – the general public have a tendency not to read financial paperwork of any kind, often on the presumption of ‘Oh I wouldn’t understand it anyway so why bother?’
    It is then somebody else’s fault when a penalty is incurred.

    We all need to get rid of this presumption that we cannot understand paperwork and give ourselves the true credit that we are not actually as stupid as we make out sometimes.

  • Gordon O’Donnell

    I complained when TSB stopped telling me when the interest free period ended. As they previously had (I was able to point out where, since they claimed it did not exist) I asked for and got the interest back , but in my case it was only a small amount anyway.

    • Martin Aymes

      My complaint relates to having two different interest free periods on the same card starting at different times. Last year I started a 23 month interest free period for a transfer fee of3% with Lloyds Bank and set up a direct debit to pay it off over the 23month period all good so far. Some 3 months later I needed to take a further interest free transfer to the same card for a fee of 1.5% but this time for a different period of 13 months again I set up to pay this off over the period by increasing my direct debit to cover. I have now discovered that although the payments set up would pay the transfers in time the payment to my credit card is all set against the first transfer until that is paid off and then will be set against the second transfer, however by the time the interest free period on the second transfer will have run out and I will be paying the normal interest rate. On complaining to Lloyds I was advised they understood the point but would not be changing the rules. I feel Lloyds are in breach of their contract conditions to provide me with interest freecapital for the various periods agreed too. ANY THOUGHTS ANYONE.

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