UK net credit card lending showing signs of bottoming out

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Recent credit card data published by BOE is showing signs that credit card lending may have hit the bottom in March. In May'09 net credit card lending by UK or the remaining balance showed a second consecutive month of increase for the first time since Sep'08. Net credit card lending increased 4% from £43.9B in March to £45.7B in May.

This data may be the leading indicator that consumers are more confident of borrowing on their credit cards. While lending is showing some positive signs, the average interest rates at 15.89% are still close to the highest levels since the credit crisis began. Also, while net lending has increased in the 2 prior months, it is still down 6% from May’08.

Consumer credit provided by members of the Finance & Leasing Association (FLA), who were responsible for 30 per cent of all unsecured lending in 2008, fell by 18 per cent in May compared to the same month last year. So while, these maybe first signs of a turn there still is a long way to go before consumer confidence returns and credit availability and borrowing returns.

Egg's new credit card to open the floodgates for fee based cards in UK?

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Egg, the internet bank and part of Citi, announced it will be launching a new credit card tomorrow, (14 July) the Egg Money World Mastercard and will have an annual fee of £12. This move from Egg, comes after the Govt. last week released a white paper with proposals to ban unsolicited credit card cheques, increase of credit card spending limits without the borrowers consent, limits on raising interest rates on existing debt etc.

With Egg's move, the first major credit card provider announcing a fee based card, industry watchers feel this may open the floodgates for similar moves by other credit card providers. With this credit crunch, consumers have changed their credit card spending habits which has had a negative impact on credit card companies revenues and profitability.

This drop has been a result of 2 main factors:

1. Drop in percentage of consumers carrying balances on their credit cards (Auriemma Consulting group reported a 40% year over year drop) and
2. Increase in number of consumers unable to payback their credit card bills (over 10% credit card accounts were written off in 2008 vs 3%-5% in 2006).

Credit card companies will try to maintain their profitability by switching more consumers to fee based credit cards. No fee cards will still be available, but may not offer the best deals or benefits. According to Auriemma Consulting Group by 2010, all major credit card providers will have fee based credit cards.

The Egg Money World card will offer 8.9% rate on balance transfers for life (no fee) and carry a 17.8% typical APR. The card will also provide a 1% cashback upto £200/year, which can more than makeup for the £12 annual fee if used correctly. We feel this maybe a good no fee long term balance transfer offer for some, based on their spending habit.

Once we get all the details of the credit card we will be adding it to our comparison tables. To see if Egg Money World Credit Card is the best option for you, use our calculators and see your savings.

BT revamps Credit Card Rewards Program

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BT announced today it has revamped its BT credit card rewards program. Now BT credit card users will have an opportunity to earn greater discounts on their credit card. Previously the annual rewards were capped at £75 in discounts on BT bill, now users will get unlimited discounts. The BT Credit card is unique in that it links directly to the card users home telephone and broadband accounts so the discount comes off the BT bill automatically. This is especially convinent as here are no points to forget about, vouchers to lose, or numbers to call to redeem the reward.

Along with the removal of caps on the reward BT has simplified the rewards program. Now users earn 1p in discount on every £1.5 they spend on the BT credit card. This has changed from a complicated tiered structure where users earned 1p per £2 upto £250 spend/month and 1p per £1 spend on the amount beyond £250. A feature that makes this credit card attractive is it also offers 0% on balance transfers for 13 months and 0% on purchases for 3 months. The card has a typical APR of 16.9%.

The BT Credit card is issued by MBNA, one of the largest credit card issuers in the UK. Compare the BT Credit Card with other credit cards and calculate your savings.