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.